What do you mean by business in Class 11?

What do you mean by economic activities?

Ans. Economic activities can be defined as the processes through which people generate profit and earn wealth. They are basically involved in production and distribution of products to satisfy human needs. For example: A shopkeeper selling goods in his shop is a perfect illustration of an economic activity. Thus, economic activities are referred as the production and distribution of products to earn wealth by satisfying human needs.

What are the main differences between economic and non-economic activities?

Ans. Differences between economic and non-economic activities are:

Base	Economic activities	Non- economic activities
Definition	They are the activities aimed at generating wealth.	They are aimed the activities aimed at fulfilling physcological, social and emotional needs.
Motive	It main motive is to earn profit.	Their main motive is social or psychological.
Result	Production and distribution of goods is achieved.	Personal satisfaction is achieved.
Measurement	It can be measured in terms of money.	They are impossible to be measured in terms of money.
Type	They are of three types; business, profession and employment.	It can be social, religion and similar other activities.
Rules	They are limited certain rules and regulation.	They are not limited to rules and regulation.

Define business. How does it differ from a profession of employment.

Ans. Business simply can be referred as the activity of making money by producing or buying and selling goods or by providing services. These activities include only the economic activities and excludes the non-economic activities. Thus, a business is a economic hub where buying, selling and distribution of goods/ services takes place to generate profit. However, the profit generation process should be law abiding and ethical. Business is the act of buying, selling and distribution of goods and services with the motive of earning profit with a minimum educational background. Whereas profession is a job that needs high level of education training and renders specialized services for a certain fee. Whereas employment is the condition of having a paid job by abiding to the need of the concerned employer.

What do you understand by 'business'? Explain its characteristics.

Ans. The term 'business' can simply be understood as the state of being busy. In economic terms, it is the act of buying, selling and distributing goods with the motive of income generation. It is an economic system in which goods and services are exhanged for money, as per their value. According to Lewis Henry, business is defined as, "Human activity directed towards producing or acquiring wealth through buying and selling goods."

Characterstics:-

a. Production and distribution of goods and services: All business activities are concerned with the production and distribution of goods and services for a certain value. It excludes production of goods and services for self-consumption.

b. Human activity: A business cannot exist without humans. They are the ones who perform all the functions of business. They include owners, customers, distributors, etc.

c. Economic activity: A business is always an economic activity. It is established by individuals or groups to serve the needs of society. It is concerned with profit generation.

d. Exchange of goods and services: A business is primarily concerned with exchange of goods and services for money or money's worth.

e. Continuity: The exchange of goods and services should be continous in nature. One time transactions cannot be termed as a business. The activites performed should be regular and routine in nature.

f. Satisfying customer: The objective of business is to earn profit by rendering proper services to the consumers. Without satisfied customers, a business cannot exist.

g. Risk and uncertainty: A business is comprised of risk and uncertainty. Risk directs us to the fact that loss may occur and risk always rises from the uncertainty of future. Moreover, the modern world is everchanging due to which risk and uncertainty are always in the business.

h. Creation of utility: Business produce/ sell or distribute products which serve a purpose to the customers. These products are transported to the places where they are demanded and are also stored for future demands. Thus, creating place and time utility.

i. Profit: A business is established to earn profit. The survival of business depends upon the profit it generates. Without profit a business cannot exist.

j. Organisation: Business is a system. It cannot exist. Without any structure and an enterpreneur. Presence of simple, easy and modern type of organizational structure is always essential.

k. System: A business is a system of interrelated activities:- Inputs process and outputs. Inputs are raw material which pass through processes like machinery and tools to produce outputs in the form of products and thereby profit.

"Profit maximization is the ultimate goal of business." Discuss

Ans. A business is established with the prime objective of earning profit. The business should be able to earn reasonable profit as the survival of a business depends upon its ability to earn profits. In other terms, the life of a business depends upon the profit it generates. Without profit a business will cease to exist. Every business in the economic world are carried out with a expectation of earning some return on the investment.

On the basis of the returns, expenses of the organizations are met and if profit is not present a business cannot sustain itself. Thus, a business is constantly looking to maximize its profit. No business can survive if it endures losses for some years. Profit is pivotal in ensuring the survival, growth and prestige of a business. Hence, "Profit maximization is the ultimate goal of business."

What do you understand by industry? Discuss various types of industry.

Ans. An industry can be defined as a business indulged in production of similar goods by utilizing different resources. Industry is a systematic process of extraction. Production, conversion and fabrication of products with the aid of human and mechanical power. The products thus produced maybe used for consumption or processing or further production.

Types of industry: Industry are broadly classified into 2:

Primary Industry: The industries involved in extracting natural resources and reproducing plants and organisms are known as primary industry. The products of primary industry is essential to the secondary industry. Primary industry are of 2 types:

a. Extractive Industries: They are involved in extracting natural resources from the nature with the help of human skills. For example, coal mining is an extractive industry where coal is mined from earth.

b. Genetic Industries: They are involved in reproducing certain types of plants and animals for generating profit. A perfect example of genetic industry is poultry farming where chickens are raised for meat and then wealth.

Secondary Industry: The industries involved in coverting raw materials or semi-finished goods into finished goods are known as Secondary Industries. They are dependent upon the products of primary industries. Secondary industries are broadly categorised as: Manufacturing and Construction Industries.

a. Manufacturing Industries: These industries convert raw materials or semi-finished goods into finished products. They give a complete new look to raw materials or semi-finished goods by guiding them through certain procedures. Manufacturing Industries can be Analytical Industries, Synthetic Industries, Processing Industries, Assembling Industries and Continuous Industries.

b. Construction Industries: As the name applies, these industries are primarily involved in construction works. They construct roads, bridges, buildings and etc.

What is a Commerce? Distinguish between Trade and Commerce.

Ans. Commerce can be defined as an exchange of goods and services including the activities which assist the exchange. Commerce is concerned with the interchange of products either in the form of raw materials, or semi-finished goods or financial goods. It covers not only the buying and selling of goods, but also many services which must be provided to finance, insure, store and transport of goods in the course of the exchanges. It is an act of transfering ownership from producers to the consumers.

Base	Trade	Commerce
Meaning	Trade is Purchase and sale of goods and services.	Activities involving distribution of goods and services.
Scope	Comprises exchange of goods and services.	Comprises trade and auxiliaries to trade.
Capital	Capital is needed to maintain stock and grant credit.	Need for capital is comparatively less.
Side	It represents both supply and demand.	It represents demand side of goods and services.

Discuss the components of commerce.

Ans. The main components of commerce are: trade and aids to trade.

Trade: Trade is tha main component of commerce. It involves buying, selling and transferring of products. Within a country or outside a country. Trade can be categorised as:

A) Internal Trade: The buying, selling and exchanging of products within the boundaries of a country is known as Internal or Domestic trade. Domestic trade takes place between the traders of a country. Internal trade is classifies as:

i. Wholesale Trade: In this trade, products are sold, bought and exchanged in bulk. The wholesaler buys products directly from the producer in large amounts and sells them to the retailers in smaller amounts.

ii.Detail Trade: A retail trade is such type of trade where a retailer buys in bulk from wholesalers and sells them to the consumers in small quantities.

B) International Trade: International Trade is also known as Foreign Trade. It is the buying and selling of products between traders of two or more countries. Wholesale trade is conducted in International Trade through foreign exchange and international means of transport. International Trade is divided into 3 as:-

i. Import Trade: Import trade is involved in purchasing goods from foreign countries for consumption in domestic market.

ii. Export Trade: Export Trade is involved in selling domestic products to foreign countries.

iii. Entrepot Trade: Entrepot Trade is the mix of both export and import trade. It is involved in purchasing a product from one country and selling it to the consumers of another country. Example: Nepal imports cars from China and exports them to India.

Aids to trade: They consists of services that assist trade. They can be:-

a. Banking: Banks provides services such as accepting deposits and granting loans. They provide a safe and secure method for making trade payments.

b. Transportation: Various means of transportation like trucks, vans and planes are used for carrying goods from the producers to the consumers.

c. Distribution: Middlemen like wholesalers, retailers and facilitate the distribution of goods to the consumers as producers seldom sell directly to the consumers. Thus, making the middlemen an auxillary service.

d. Packaging: Packaging is done in order to ensure the safety of security of the products. It is vital that the goods remain same and intact when it finally reaches the consumers.

e. Warehousing: Warehousing ensures that products are stored safely to meet future demands.

f. Insurance: Insurance provides financial protection to trade and industry against any harm incurred during their production, storing and transportation.

Classify and explain various types of trading activity:

Ans. The various types of trading activity are:

a. Warehousing: There is generally a time lag between the production and consumption of goods. This problem can be solved by storing the goods in warehouse. Storage creates time utility and removes the hindrance of time in trade. It performs the useful function of holding the goods for the period they move from one point to another. Thus, ware housing discharges the function of storing the goods both for manufacturers and traders for such time till they decide to move the goods from one point to another.

b.Advertising: Advertising performs the function of bridging the information gap about the availability and uses of goods between traders and consumers. In the absence of advertising, goods would not have been sold to a widely scattered market and customers would not have come to know about many of the new products because of the paucity of time, physical-spatial distance, etc.

c. Storing: immediately after the goods are produced they are to be stored. Storing is an important trading activity as products are to be kept in the right condition before being dispatched to the buyers. Storing not only implies to finished goods nut also to raw materials and semi-finished goods too. Proper storage aids in smooth production.

10.

Discuss the various objectives of business.

Ans the various objectives of business can be as follows:

a. Profitability: Maintaining profitability means making sure that revenue stays ahead of the costs of doing business, according to James Stephenson, writing for the "Entrepreneur" website. Focus on controlling costs in both production and operations while maintaining the profit margin on products sold.

b. Productivity: Employee training, equipment maintenance and new equipment purchases all go into company productivity. Your objective should be to provide all of the resources your employees need to remain as productive as possible.

c. Customer Service: Good customer service helps you retain clients and generate repeat revenue. Keeping your customers happy should be a primary objective of your organization.

d. Employee Retention: Employee turnover costs you money in lost productivity and the costs associated with recruiting, which include employment advertising and paying placement agencies. Maintaining a productive and positive employee environment improves retention, according to the Dun and Bradstreet website.

e. Core Values: Your company mission statement is a description of the core values of your company, according to the Dun and Bradstreet website. It is a summary of the beliefs your company holds in regard to customer interaction, responsibility to the community and employee satisfaction. The company's core values become the objectives necessary to create a positive corporate culture.

f. Growth: Growth is planned based on historical data and future projections. Growth requires the careful use of company resources such as finances and personnel.

g. Maintain Financing: Even a company with good cash flow needs financing contacts in the event that capital is needed to expand the organization. Maintaining your ability to finance operations means that you can prepare for long-term projects and address short-term needs such as payroll and accounts payable.

h. Change Management: Change management is the process of preparing your organization for growth and creating processes that effectively deal with a developing marketplace. The objective of change management is to create a dynamic organization that is prepared to meet the challenges of your industry.

i. Marketing: Marketing is more than creating advertising and getting customer input on product changes. It is understanding consumer buying trends, being able to anticipate product distribution needs and developing business partnerships that help your organization to improve market share.

h. Competitive Analysis: A comprehensive analysis of the activities of the competition should be an ongoing business objective for your organization. Understanding where your products rank in the marketplace helps you to better determine how to improve your standing among consumers and improve your revenue.

11.

Whether business is essential to the society or society is essential to business? Discuss.

Ans. Both the society and business are essential to each other. Without society a business cannot exist and viseversa. A society thrives on what business provides and business thrives on what society provides.

A business enterprise is now considered not only as an economic institution but also as a social institution and a living member of society. It has both economic function and social function. However, no business, particularly big business, can ignore its social responsibility as a member of society. What is good for the society and country must be good for the corporation. Managers are obliged to protect and and to serve the public interest, not as a byproduct of managerial activity, but as an integral part of their managerial function. Hence the business enterprise is called upon to integrate the vital economic and social objectives and fulfill its twin mission in the environment in order to enjoy stable and continuous life.

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Discuss the concept of business. why is it important for economic development of the nation?

Ans. The term 'business' can simply be understood as the state of being busy. In economic terms, it is the act of buying, selling and distributing goods with the motive of income generation. It is an economic system in which goods and services are exhanged for money, as per their value. A business may be defined as an institution organized and operated to provide goods and services to the society with the objective of earning profit.

According to Lewis Henry, business is defined as, "Human activity directed towards producing or acquiring wealth through buying and selling goods."

According to Prof. Richard Norman Ownes, business is “an enterprise engages in the production of goods for sales in a market or the rendering of services for a price.”

The importance of business for the economic development of business are:

a. Self-dependence: Through business, a country can produce all those goods which are useful for their people and which are imported from outside country. So after the development of business in a country, dependency upon another country can be reduced.

b. Utilization of resources: The business makes it possible to utilise the natural resources of a country because to produce regularly large quantity of goods, raw materials, man powers, capital, etc. are required. There will be maximum utilization of resources in a country through business.

c. Employment opportunities: The scope of business is spread in commerce and industry. Different kinds of people can get job opportunities in different levels according to their knowledge and ability. So it can reduce the burden of unemployment in a country.

d. Increase in government revenue: The business can also help in the increment of government revenue through excise duty, income tax, sales tax, value added tax, etc. As the number of business enterprises increase, government revenue also increases.

e. Availability of goods and services: Business provides goods and services in good quality to the consumers at reasonable price rate because the aim of business organization is to satisfy consumers. To conduct business is a long run job. This is the first condition.

f. Earning foreign currency: By the development of business, a country can produce qualitative goods in large scale at a resonable price. So exporting those goods and services to foreign countries the business can spread in foreign markets which can help to earn foreign currency.

g.International relationship: By the development of business a country can export and import goods and deal with other countries which establishes trade relation between them. Later this trade relation helps to develop social, political, cultural and economic relationship among different countries.

What do you understand by social responsibility of business? discuss the main areas of business responsibilities.

Ans. Social responsibility is an ethical or ideological theory that an entitywhether it is a government corporation, organisation or individual has a responsibility to society. Social responsibility means an intelligent and objectives concern for the welfare of society that limits or prevents individual and corporate behavior from ultimately destructive activities and to the betterment of human resourses in different ways as desired by society.

The following are the areas of social responsibility of a business.

a. Investors: The owner of the business, i.e. shareholders to whom a fair return on capital must be guaranteed. One of the important responsibility of a business firm is to maximize the value of shares and to maintain good relations between managers and shareholders.

b. Employees: The employees, each of whom must be satisfied and encouraged to contributed voluntarily his best in the joint endeavour. Man should be treated as human being not as a machine. The firm should conduct training and development programmes to provide incentive to the employees and to improve their performance.

c. Consumers: The consumers, i.e. the market, who have to be satisfied about the quality, quantity, price, etc. of the product. Customers must be treated as god in business organizations. They should be protected from black market, fraud, mix of inferior quality, artificial shortage, etc.

d. Society: The society at large, of which it must promote the general good or welfare. Business organization is also a component of society so it should also try to fulfill the expectations of the society. It has to involve in social development, welfare and economic activities.

e. Government: Government has also some expectations from the business organization. Business firm has to pay tax and other different kinds of charges to the government which is the source of government revenue and it is used for national development and for the betterment of the people.

"Profit is the sole objective of a business is similar to say that eating is the objective of living." Do you agree? Give reasons.

Ans. "Profit is the sole objective of a business is similar to say that eating is the objective of living." Yes, I totally agree with the statement.

The main objective of a business is to earn reasonable profit as the survival of a business depends upon its ability to earn profits. Like a living being cannot survive without eating, a business cannot survive without earning profit. In other terms, life of a business depends upon the profit it generates. Without profit, a business will find it hard to exist. Every business in the economic world are carried out with an expectation of earning some return on investment. On the basis of the returns, expenses of the organizations are met. And if profit is not present it cannot sustain itself. From small petty expenses to bulk sum of money, a business is constantly looking to maximize profit. No business can survive if it endures losses for some years. Profit is pivotal in ensuring the survival growth and prestige of a business.

Hence, from above explanation we can certainly say that, "Profit is the sole objective of a business similar to say that earning is the objective of living."

“The ultimate goal of business is to make profits”. “The main objective of business is to render service to the community.” Reconcile these two statements.

Ans. As we have already explained business is basically an economic activity it is clear that the motive is profit earning. A business is established to earn profit or maximize wealth. Profit is essential for the business for its development, diversification, and modernization and to provide return on investments. It cannot be denied that business is always functioning for the profit incentives. Uncertainties such as trade cycle; patterns of demand and so on are met by the profits earned by the business. Profit is not only important for the existence of the business but is equally important in its growth and diversification. Various stakeholders of the business have their own expectations from the business. For instance, investors want adequate return on their investments, workers want more wages and entrepreneurs want profit for re-investment. Thus, we can say that profit is required to protect the interests of the stakeholders. And if the interests of the stakeholders are not met the business cannot exist. It will dissolve and disappear. The business, hence, is always involved in charging an extra reasonable cost in the actual cost of the product, which is beneficial for both the society and the business. Thus, we can say “the ultimate goal of business is to make profits”.

Likewise, equally the main objective of business is to serve the community. The business is obliged to undertake activities for the wellbeing of the society in addition to the business activities. Each and every organization in the business world are established and operated in the society; so it is a part of society and serving the community should be its prime objective. Even though the business is always established to earn profit, it should be able to meet the various needs of the community for its smooth and successful operation in socially acceptable manner. Thus, the main objective of business lies in serving the community. Today, the business should be able to solve various social problems. It should provide quality product at cheaper price even by reducing profits, support in social, educational and other similar activities. After all, the community provides all the resources for the business to function.

In this modern day, the business should understand that profit can be earned through social service. A positives society creates profit for the business. So, even though the prime objective of a business is to earn profit, it cannot ignore the social aspect too. Thus, both the above-mentioned statements are true definitions of objectives of a business.

“The business of business is to do business and thus secure social and economic ends”. Comment.

Ans. The business is always involved in meeting the social and economic ends. The social comprises of supplying quality product, availability of timely goods, and creation of employment, Utilization of resources and co-operation with the government. Whereas, the economic ends are ensured by profit earnings, production of goods, creating market, technological improvements.

A business is always expected to undertake the activities that facilitate the betterment of the society. A business conducts its business within the boundary of the society. It uses the resources of the society for its existence, survival and growth. Any activities that are against the interests of the society are not to be done. We can say that a business ascertains the demand of the society and supply the commodities accordingly. Artificial shortage and unreasonable prices are not created. The business is always providing commodities as per the need of the society. A business is always involved in providing quality products at reasonable price. Supply of low quality products at high unreasonable prices to the society does not serve the business ethics. Likewise, business creates employment opportunities for the people of the society. The human resource is required at every stage of the business process from production till distribution. The society provides manpower in exchange of compensation as salaries and wages. Thus, the social need of employment is served.

As we have already explained business is basically an economic activity it is clear that the motive is profit earning. A business is established to earn profit or maximize wealth. Profit is essential for the business for its development, diversification, and modernization and to provide return on investments. It cannot be denied that business is always functioning for the profit incentives. Uncertainties such as trade cycle, patterns of demand and so on are met by the profits earned by the business. Profit is not only important for the existence of the business but is equally important in its growth and diversification. Various stakeholders of the business have their own expectations from the business. For instance, investors want adequate return on their investments, workers want more wages and entrepreneurs want profit for re-investment. Thus, we can say that profit is required to protect the interests of the stakeholders. And if the interests of the stakeholders are not met the business cannot exist. It will dissolve and disappear. Thus a business is established to meet the economic ends.

Thus, from the explanations we can certainly say that “The business of business is to do business and thus secure social and economic ends”.

“There is only one valid definition of business purpose that is to create a customer.” Comment on this statement and describe the various functions of business.

Ans. Business is the activities humans do for their living. In simple terms business means to be busy but in broader terms it includes all economic activities concerned with earning profit. Profit can be earned through production and distribution of goods and services. In other terms we can say that a business is a part of an economy that is engaged in the production and distribution of goods and services for people to consume and earn profit as compensation. The compensation received as profit is essential for the existence, growth and survival of the business. And if there are no customers there is no profit. Thus, the purpose of business is to create profit by creating customers. As god is to humans so are customers to business. The main sources of income for the business are the customers. Customers determine the survival and growth of a business. Moreover, a satisfied customer serves as the best form of advertisement of a product for the business. It creates a better goodwill which is good from the business point of view. Customers are the backbone of the business that supports it. A business cannot survive until it can adequately satisfy and grow its consumer base. In order to adequately satisfy the customers, the business should be able to provide quality service. If the customers are left unsatisfied, they opt for alternative products. A business should constantly try to satisfy the customers to maintain the demand of the products. The very existence of the business depends upon the relationship it enjoys with its customers. A businessman should try to produce goods as per the needs and demand of the consumers. The commodities produced by the business are always sold to the consumers for a certain price. The price is the result business which is known as profit. Likewise, the business does business to provide appropriate goods and services to the customers. This creates satisfaction. The satisfaction in turn generates profit for the business. The customers purchase goods to fulfill their cravings and achieve satisfaction. Higher the level of satisfaction higher will be the profit. The foundation of business is customer satisfaction not profit

Thus from the above explanation we can say that “There is only one valid definition of business purpose, that is to create a customer”.

“Profit is not the object of a business but it is the result of business”. In the light of this statement, give arguments against the profit maximization objective.

Ans. A business can be defined as the activity pursued with the objective of earning profit. They are the human activities directed towards providing or generating wealth through buying and selling of goods and services. All the activities included in the production and sale of goods or services are termed as business activities. So, we can assume that a business primarily, is involved in the production and distribution of goods and services to generate profit. And by this we can’t assume that profit comes first. At first, business produces products and them distributes them to the consumers. Then arrives the profit. The object here is production and distribution of goods and services not the profit. The main objective of business is to produce and distribute commodities to the consumers as per their wants and desires. Without these objects profit will never exist. The expansion of production and development results in profit generation and maximization. Thus, profit is not the object of the business but the result of business. Profit is the result of business activities like warehousing, transportation, production and distribution. A business never does business for self-consumption. The commodities are always sold to the consumers for a certain price. The price is the result business which is known as profit. Likewise, the business does business to provide appropriate goods and services to the customers. This creates satisfaction. The satisfaction in turn generates profit for the business. The customers purchase goods to fulfill their cravings and achieve satisfaction. Higher the level of satisfaction higher will be the profit. Thus, the foundation of business is customer satisfaction not profit. Likewise, the objective of business is to serve the community then earn profit. The business is obliged to undertake activities for the wellbeing of the society in addition to the business activities. Each and every organization in the business world are established and operated in the society; so it is a part of society and serving the community should be its prime objective. Even though the business is always established to earn profit, it should be able to meet the various needs of the community for its smooth and successful operation in socially acceptable manner. Today, the business should be able to solve various social problems. It should provide quality product at cheaper price even by reducing profits, support in social, educational and other similar activities. After all, the community provides all the resources for the business to function.

Thus from the above discussions we can reason that, “Profit is not the object of a business but it is the result of business”.

“The concept of social responsibility is ultimately in the interest of business community itself”. Do you agree? Give reasons.

Ans. “The concept of social responsibility is ultimately in the interest of business community itself”. Yes, I totally agree with this statement. The business is always obliged to undertake activities for the wellbeing of the society in addition to the business activities. Each and every organization in the business world are established and operated in the society; so it is a part of society and serving the community should be its prime objective. Even though the business is always established to earn profit, it should be able to meet the various needs of the community for its smooth and successful operation in socially acceptable manner. Thus, the main objective of business lies in serving the community. A business is always expected to undertake the activities that facilitate the betterment of the society. A business conducts its business within the boundary of the society. It uses the resources of the society for its existence, survival and growth. Any activities that are against the interests of the society are not to be done. We can say that a business ascertains the demand of the society and supply the commodities accordingly. Artificial shortage and unreasonable prices are not created. The business is always providing commodities as per the need of the society. A business is always involved in providing quality products at reasonable price. Supply of low quality products at high unreasonable prices to the society does not serve the business ethics. Likewise, business creates employment opportunities for the people of the society. The human resource is required at every stage of the business process from production till distribution. The society provides manpower in exchange of compensation as salaries and wages.

Today, the business should be able to solve various social problems. It should provide quality product at cheaper price even by reducing profits, support in social, educational and other similar activities. After all, the community provides all the resources for the business to function.

In this modern day, the business should understand that profit could be earned through social service. A positives society creates profit for the business. So, even though the prime objective of a business is to earn profit, it cannot ignore the social aspect too.

Thus, from the above reasoning we can certainly say that, “The concept of social responsibility is ultimately in the interest of business community itself”.

Do you think businessmen in Nepal are fulfilling their social responsibilities? In what ways can Nepalese businessmen discharge their social responsibilities? Explain.

Ans. Social responsibilities refer to the obligations and duties of business to undertake the activities for the well being of the society. In the context of Nepal, businessmen do not seem to fulfill their social responsibilities of providing quality products, proper availability of goods and so on. But by saying that doesn’t mean the social responsibilities are not being addressed. It just implies that there only a handful of businessmen who are fulfilling the social responsibility and some are just lacking behind.

The Nepalese businessmen can discharge their social responsibilities by fulfilling the following responsibilities:

a. Responsibilities towards shareholders.

The shareholders are the true owner of a company. They are the ones who bear the risk and uncertainty of the organization. Hence, the business should always take care of the shareholders and their interests. The Nepalese businessmen likewise can fulfill their responsibility towards the stakeholders by providing safety of their investment, fair and regular return on capital to the shareholders, regular and accurate information of the financial position of the business and similar other facilities.

b. Responsibility towards customers:

The Nepalese businessmen should be able to satisfy the wants and needs of the Nepali society. The society can only be satisfied if quality products at reasonable price are supplied. Thus, while preparing the business policies, the businessmen should take into consideration the interests of the consumers too. Today, in Nepal we can see that the market is full with low quality products at very unreasonable and unacceptable prices. The customers are forced to consume such products due to artificial shortages and monopoly. Thus, the Nepalese businessman can discharge their responsibilities to the society by altering this scenario of extortion.

c. Responsibility towards employees:

The employees are the backbone of the organization. Every business activities in an organization are carried out by the employees. A business can reach its full potential only if the employees work honestly and whole-heartedly. Thus, it is essential that they are constantly encouraged and motivated for better results. These are the responsibilities towards the employees. Similarly, the businessmen in Nepal can discharge their responsibility towards their employees by providing fair compensation, security of job, proper training and promotion, proper mental and physical atmosphere, appreciation and recognition of tasks performed and many other similar activities. In this way the Nepalese business can flourish.

d. Responsibility towards community:

A business conducts its business within the boundary of the society. It uses the resources of the society for its existence, survival and growth. Any activities that are against the interests of the society are not to be done. We can say that a business ascertains the demand of the society and supply the commodities accordingly. Artificial shortage and unreasonable prices should not be created. The business should always provide commodities as per the need of the society. A business should involve in providing quality products at reasonable price. Supply of low quality products at high unreasonable prices to the society does not serve the business ethics. Likewise, business should create employment opportunities for the people of the society. Thus, in this way the Nepalese businessmen can fulfill their responsibility towards the society and community.

e. Responsibility towards government:

Government co-operation is an essential ingredient in the smooth and efficient functioning of a business. However, in the Nepalese context the businessmen don’t seem too concerned about their responsibilities towards the government. The business should be conducted within the legislative periphery of the country. Thus, the Nepali businessmen can discharge their responsibility towards the government by: adhering to the rules and regulations of the Nepalese government, paying taxes regularly and honestly, co-operating with the government to solve national problems, avoiding monopolistic and illegal trade practices.

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What are the pre-requisites for a successful business?

For a business to be successful it should meet certain requirements. The pre-requisites of a successful business are explained as below:

Setting objectives: A business should first determine its objectives. It points out the way to achieve the pre-determined objectives. It explains what to do, where to do, what will do and who will do. These form the base of a business. All the objectives of a business should be clearly set up so that it can guide the resources towards the business objectives

Good management: Good management is an important aspect of a successful business. It is the art and science of utilizing the resources of an organization. A business can only achieve its objectives if the resources are utilized properly. The existence of an effective and efficient management is a must for every successful business.

Adequate capital: Before establishing a business it is essential to understand the adequate capital required. The required capital should be made available at all times so that it does not hamper business activities. Capital is needed for buying fixed assets and performing day to day activities. Thus, to achieve business goals an appropriate capital structure should be maintained.

Modern technology: Modern technologies can be used to produce well finished products at a lower cost. Thus, the business organization should adopt modern equipments and machineries in each and every field.

Research: A business should always facilitate research activities. Research aids the business in creating new innovative ideas and products. Thus, a successful business should always provide facility for research.

Proper location, layout and size: A proper location indicates access to electricity, road, water and etc. a proper layout indicates optimum organization of machines and equipments in the office space. These two factors play a pivotal role in smooth functioning of a business.

Employee morale: The employee morale should be at the highest level to effectively achieve business goals. The employees should always be treated as the most precious assets. Continuous efforts should be made to encourage and provide satisfaction to them.

Leadership: The leadership of the business should be efficient and dynamic. The organizational objective is achieved though a cycle of management functions such as planning, implementing and controlling. And efficient and dynamic leader is the one who has farsightedness, courage, initiative and aptitude for change in performing those management functions.

Marketing system: A business should have the best marketing system to be successful. The marketing aspect is more important than production. A proper marketing system ensures mass production, effective promotion, customer satisfaction and proper distribution system.

What do you mean by industry? Trace out the development of industry.

Industry can be defined as the process of producing goods and services through certain process by utilizing human force, money and machine. It includes all those activities that produce goods and services. Since the primitive ages, human beings have been engaged in producing goods and services to satisfy their wants and needs. At first, the human needs were limited, they used to hunt animals for food and hide. And as time passed they started domesticating animals for meat and milk. Then they started to cultivate lands for food. Thus, the history of industry can be traced back to the start of human civilization. The evolution of industry can be explained from the following points:

Handicraft stage: The handicraft stage was the beginning stage of industrial evolution. As the needs of human beings went on increasing people started to produce products of their convenience. They used locally available raw materials to produce goods. This gave birth to handicrafts. The goods they could not produce were exchanged with the goods they produced. They used simple handmade tools so; the production was at the minimal level.

Guild stage: A guild indicates an organized group of traders or craftsmen. There were two guilds, namely: merchant guild and craft guild. The merchant guild was the association of merchants who were engaged in regulating business and standardizing their products. Meanwhile, the craft guild was the association of skilled craftsmen who tried to maintain the quality and quantity of production. The guild system ushered a lot of growth of industries but it gradually vanished due to favoritism, rigid vision, restriction on the entry of new members and etc.

Domestic system: The failure of the guild system gave birth to the domestic system. With the passage of time, the population kept on increasing, as result craftsmen were unable to supply products due to lack of men and material. But in the 18th century a group of new entrepreneurs emerged who gave necessary materials to the individual craftsmen to produce goods and were paid on the basis of piece wage. As the owner of the business they were liable to all the risks. This system brought division of labor in the industry.

Industrial revolution: Industrial revolution refers to the drastic changes made in the field of production in Britain during the 18th and 19th century. It was the result of scientific inventions that changed the tools and techniques of production. Industrial bought changes in every level of the production stage. The results were mass production, standardization of products, development of capitalism and etc.

Present stage: Today’s age is the age of mass production. Since the dawn of the 20th century great technological revolutions have taken place. Developments such as mechanization, computerization and automation have resulted in standardization, quality control, searching market and etc.

What do you mean by commerce? Trace out the evolution of commerce.

Commerce can be defined as all those activities of selling and buying products that result in trade activities such as transportation, warehousing, banking and other ancillary services. The evolution of commerce can be trace out in the following stages:

Self-sufficient economy: In the primitive ages, the human wants were less. They could satisfy their wants of food and cloth through hunting and foraging. This age is known as the self-sufficient period.

Primitive barter economy: In this stage the humans were somewhat civilized. Any goods in excess were exchanged with the goods they could not produce. Moreover, the population of humans started increasing so did their wants. So, they started producing similar goods in large amount and exchanged the surplus with other products needed. However, due to the absence of communication of transportation and communication, actual trade did not take place.

Money economy: Since, the barter system was not flexible enough a medium of exchange called money was created in this stage. Coins and paper notes were created as a medium of exchange. After the rise of money, people started producing goods in mass quantity and traders started performing activities that assisted quick transfer of produced products. Slowly people started selling goods at a particular place which later became market.

Town economy: After the introduction of money, business grew by leaps and bounds. Division of labor and specialization of work was encouraged in this stage. As a result a certain type of class of traders emerged who lived in a certain place called market where products were produced, bought and sold. Gradually these small markets started to grow into towns. Wholesale and retail business started to grow.

National economy: Town economy led to the development of ancillary services of trading such as communication, warehousing, transportation and banking. It ushered the growth of the economy to national level. They started to produce products not only for the local markets but for the national market too. Hence, the national economy came within the reach of business activities.

Global economy: As the economy started to grow, it started to inspire the growth of airways, waterways, railways and communication. As a result the national boundaries were narrowed down into one single large economy. Thus, the producers started to produce for the global market too. International trade came into existence. To develop and regulate international trade many countries have entered into multilateral, bilateral trade agreements.

Environment and the business have deep relationship. Comment.

Environment and the business have deep relationship. Yes, it is completely true. They are interrelated to each other. The environment of the business is the aggregate of events and conditions which influence the activities of business organizations directly or indirectly. A business established and functioning in a society is constantly surrounded by environmental factors. It is the circumstances under which a business exists. It is the force that creates conditions and influences on the capacity of a business firm to compete in the market. Environment influences the life and development of a business. It is essential to monitor environmental changes for the smooth functioning of business.

Today’s world is very competitive world. A efficient and dynamic also cannot save business if he does not study the environmental factors surrounding the business. If environmental factors are not dealt quickly with, it results in failure. The leaders of the business however must know that the environment of a business differs from industry to industry and market to markets.

Thus, we can say that environment and business indeed have a deep relationship. Business environment is concerned with factors that influence the activities of the business. The internal environment provides strength and weakness to the business whereas the external environment provides threats and opportunities to the business.

Discuss the qualities of a good businessman.

A businessman can be deemed a good businessman if he/she possess the following qualities:

Managerial Skills: A businessman is responsible for all the business activates. So he should have suitable managerial skills.

Hard working: A businessman must work very hard to develop and run his or her business. He should be able to work for long hours without breaking his or her concentration.

Courteous: A businessman must talk with his subordinates, colleagues and customer politely and with respect. Customer always appreciates a courteous businessman.

Decision power: A businessman has to make many decisions regarding her or his business. An important decision must be made quickly and correctly to advance his or her business.

Ability To Plan: Planning is very important part of any business activity. A successful businessman must plan for the future and execute it successfully according to their vision.

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What do you mean by business environment? How does a business interact with its internal and external environment?

The environment of the business is the aggregate of events and conditions which influence the activities of business organizations directly or indirectly. A business established and functioning in a society is constantly surrounded by environmental factors. It is the circumstances under which a business exists. It is the force that creates conditions and influences on the capacity of a business firm to compete in the market. Environment influences the life and development of a business. It is essential to monitor environmental changes for the smooth functioning of business.

According to Keith Davis – business environment is” the aggregate of all conditions, events, and influences that surround and affect a business.”

The business environment consists of two environments- internal environment and external environment. The business is constantly reacting with these two environments. The internal environment consists of:

Employees:The employees are the human resource of an organization. They are the most important assets of the organization. Employees resist change but the business has to mobilize them to achieve business goals. The management is continuously interacting, motivating and encouraging the employees to achieve business goals.

Shareholders: The shareholders are the owner of the organization. They are the ones who have invested their money in the business. They elect the board of directors who are responsible for managing the business, formulating and implementing strategies. Both shareholders and board of directors are actively involved in day to day operation of the business.

Culture: The organizational culture includes the norms and values of the organization. It refers to the set of behaviors and practices which are acceptable by the organization. It assists in binding the employees and business with formalities.

They have a very strong influence upon the decisions implemented by the business. Successful businesses have a very good organizational culture that treat the employees in a friendly way, respects consumers and provides a healthy work environment.

Unions: Unions are the association of employees established to solve the problems and grievances of member employees. The business management is constantly interacting with these unions to create a proper working environment for the employees and provide optimum welfare services.

The external environment of business includes the following:

Economic environment: The economic environment includes economic policies, monetary policies, industrial policies, etc of an economic system. These factors directly create condition of competition, profit and loss. The business is always interacting with various economic components such as business cycle, GNP trends, consumption pattern and interest rates.

Socio-cultural environment: The socio-cultural environment concerns the values, beliefs, and culture surrounding the business. The society and culture of people differs from country to country. Such differences can be clearly seen in office work places. The business should be able to understand these differences. Moreover, it should also be able to consider the tradition, beliefs, values and attitudes of the society while producing products.

Technological environment: The technological environment consists of the tools and techniques used in the production process. It consists of the new techniques and new approaches. The manager should keep a constant eye in the technological changes. Changes in technology have always created vast opportunities for business.

Political environment: It indicates the influence of political ideologies upon a business. The government and strategies of political parties effects the business organizations. They create both challenge and opportunities for the business. An organization can never grow in a turbulent political system. Political environment consists mainly of Capitalism, Socialism and mixed economy.

Legal environment: The legal environment is concerned with the laws and regulations of a particular country. It consists of the laws passed by the legislative body of the country. Legal forces often try to restrict autonomy of an individual firm, and, at the same time, they also provide facilities and basic incentives to run a firm. The business is obliged to follow the rules passed that are passed legally.

Describe the evolution of business in the world.

The evolution business in the world can be traced with the development of its two constituents- industry and commerce. The following points trace out the evolution of industry and commerce which eventually points out the evolution of business:

The evolution of industry can be explained from the following points:

Industrial revolution: Industrial revolution refers to the drastic changes made in the field of production in Britain during the 18th and 19th century. It was the result of scientific inventions that changed the tools and techniques of production. Industrial revolution bought changes in every level of the production stage. The results were mass production, standardization of products, development of capitalism and etc.

“Successful business depends upon the consideration of pre-requisites of successful business.” Discuss.

“Successful business depends upon the consideration of pre-requisites of successful business.” This statement can be explained with the help of following points:

What do you mean by business? What factors do you consider before starting up a new business?

Business is the state of remaining busy. In economic terms it can be defined as the process of production, buying and selling of commodities for monetary benefits. It is a human activity concerned with earning profit and generating wealth. Business consists of two major activities- industry and commerce.

Various factors should be considered before starting up a business. The important factors are explained below:

Selection of business: Businesses are of various types. The businessman should already decide what form of business he wants to conduct. It is difficult change business overtime as it requires huge amount of capital and time. The businessman should consider the following factors before selecting a business:

Personal ability, knowledge and skill

Degree of risk

Profitability

Availability of resources

Possibility of growth and expansion

Competition

Laws

Investigation

The businessman should make a detailed investigation to find out the difficulties and possibilities of further development. Detailed investigation helps to find out the taste and preferences of the intended target consumers. It is difficult to ascertain what will happen in the future. Thus, present scenario helps to find the profitability of earning profit. If it is found feasible and profitable then only the businessman can take decision about business.

Form of business organization: There are various forms of organizations to choose from. There are sole concerns, partnerships, co-operatives, Joint Stock Company and etc. each form has its own sets of merits and de-merits. The businessman should choose the form of business on the basis of his ease and comfort.

Provision of capital: Capital is the key aspect of business. No business can run without capital. From buying fixed assets to performing day to day routine activities, capital is always essential. The amount of capital differs from one organization to another. However, provision of adequate capital is a must before establishing a business.

Location: A suitable location should be selected before establishing a business. Proximity to raw materials, transportation, security and all other factors should be considered. The nature of business and climate of the location should also be considered. It is better to establish business nearer to the customers and industrial organizations in cheaper area but have access to facility too.

Employees: Employees play an important role in the success and failure of a business. The required employees depend upon the nature, size and activities of the business. A businessman first need to ascertain the number of employees needed and the level of skill they require. So, while starting a business the availability of skilled employees is a must.

Office equipments: The office equipments should be selected as per the nature, size and activities of the business. Office equipments are required for the smooth functioning of the office management, administration, and control of the business. The availability and cost of equipments such as telephone, furniture, computers, etc should be considered.

Government policy: The government of the country passes laws and policies for creating a good environment for business. While establishing a business a businessman should consider the rules, regulations and procedures stated by the law. The impacts of the government policies should be analyzed beforehand.

Discuss the internal and external reasons for business failure.

A business fails due to various reasons. The sources maybe both internal and external. The internal and external reasons for business failure are as follows:

Internal reasons:

Irregularities and fraud: Irregularities and fraud in financial transactions leads to the downfall of a business. The business may fail if the employees are dishonest and engage themselves in embezzlement and misappropriation of business properties.

Mismanagement and control: The management should be competitive and should be able to exert proper control over the organization. Weak and incompetent managers fail a business.

Lack of sufficient resources: Resources such as manpower and capital should be adequate enough to operate a business. Business activities are interrupted if the resource flow dries up.

External reasons:

Competition: Sometimes, competition maybe intense in a particular market. A superior competitor may lead a business to failure.

Domestic unrest and conflict: Conflict and lack of peace in the country may cause destruction of business properties. Moreover, regular bandhas and strikes seriously affect the regular activities of a business.

Change in demand: The tastes and preferences of the consumers keep on changing. If the business fails to comply with these changes, the business will fail

Government policies: The plans and policies implemented by the government may sometimes adversely affect the functioning of a business. Policies such as heavy tax rates and ban on certain products may prove hazardous to a business.

Natural calamities: Natural calamities such as flood, earthquake and landslides are inevitable. The losses inflicted by these calamities are huge and if the business cannot revive itself from these losses it is sure to fail.

What do you mean by business environment? Explain the components of business environment.

The environment of the business is the aggregate of events and conditions, which influence the activities of business organizations directly or indirectly. A business established and functioning in a society is constantly surrounded by environmental factors. It is the circumstances under which a business exists. It is the force that creates conditions and influences on the capacity of a business firm to compete in the market. Environment influences the life and development of a business. It is essential to monitor environmental changes for the smooth functioning of business.

According to Keith Davis – business environment is “the aggregate of all conditions, events, and influences that surround and affect a business.”

Broadly, the components of business environment into two as:

The internal environment:

Employees: The employees are the human resource of an organization. They are the most important assets of the organization. Employees resist change but the business has to mobilize them to achieve business goals. The management is continuously interacting, motivating and encouraging the employees to achieve business goals.

The external environment:

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What is business organization? Explain.

A business is an economic activity and organization refers to the coming together of two or more than two people with a common aim. A business organization is an individual or group of people that collaborate to achieve certain commercial goals. Some business organizations are formed to earn income for owners. Other business organizations, called nonprofits, are formed for public purposes. These businesses often raise money and utilize other resources to provide or support public programs.

According to A.N. Agrawala – Business organization is the act of bringing into effective cooperation the available resources for production and distribution of goods with a view to earn profit.

Hence from the above explanations we can state that business organization is an act of bringing together of resources and utilizing them to achieve the common interest of the united group of people.

Write about the forms of business ownership.

Ans. There are various forms of business organization existing in the business world. Some businesses are owned by an individual while some are owned by groups. Likewise some businesses are private while some are run by government. Thus, on the basis of ownership and management we have the following forms of business ownership

Sole Trading Concern: a sole trading concern is the simplest form of business ownership where a sole individual is responsible for establishing and operating a business. He/she alone is responsible for all the investment, risk and returns.

Partnership: A partnership business is carried out by a group of individuals called partners who have agreed to establish and operate a business mutually. it is an agreement between two or more individuals whereby they agree to share profit on the basis of their investment.

Joint Stock Company:Joint Stock Company is the business entity similar to both partnership business and a company. It is a voluntary association or an organization of many people who contributes money or money’s worth to a common cause.

Co-operativeOrganization: Co-operative organization is the form of business organization where people with weaker economy come together to safeguard their social and economic interests with the principles of democracy, equality and cooperation. Thus, a co-operative organisation aims to serve the economic welfare of their members.

Public enterprises: a business organization wholly or partly owned by the state and control through a public authority. They are financed, owned and managed by the government to serve the public at large. They supply basic goods at reasonable price and provide employment opportunities.

Multinational company:Multinational companies are the business organization established in one country and functioning in many other countries. Such companies have branches in different countries and have the central office at the native country.

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Explain the factors to be considered while selecting the form business organization.

Before starting a business a businessman should always consider whether to start a sole concern or a partnership or a joint stock. Each form of organization have their own set of merits and demerits. So, he/she must consider the following factors before selecting the form of organization

Size: The most significant factor to be considered while selecting the form of business, it is essential to ascertain the most suitable size of our business. If it requires lesser individuals we opt for sole and partnership. However, if it requires more individuals we opt for joint stock and cooperatives.

Capital: Capital is an initial investment required to start up a business. Thus, if the amount of the capital required is small and entrepreneur can easily raise that amount himself. But if the amount required is large it can be raise by forming partnership or by offering shares to the general public.

Government policy: Before starting a business government policies should also be considered as policies differ with the form of the business. The policies can be about labour, registration and renewal, taxes and so on. Thus, a businessman should always consider whether a government’s policy is favourable for a form of business or not.

Management: Management here refers to the extent of control and right an entrepreneur exerts in the organization. If the prospective owner wants a higher level of control, opting for a sole concern or partnership would be a wise choice. If he/she prefers not to have such levels of control, he/she should go for a joint stock or cooperatives.

Risk and uncertainty: The uncertainty of the future creates risk. Since, a business is future oriented, risks are bound to occur. Thus, while selecting the form of business it is essential to know the level of risk the owner can bear. If the owner wants to have limited risk he/she should go for companies form of organization. And if he prefers unlimited risks, going for sole concern or partnership would be good choice.

Goods and services: It is necessary to consider the nature of goods and services an entrepreneur wants to produce before selecting the forms of the organization. If he wants to produce standardized products in mass, selecting company form of organization would be great. Likewise if he wants to produce unique products in small amounts, the business should have either sole concern or partnership form of business organization.

Continuity and stability: Each form of business organization have varying life span and cycle. For instance, if an entrepreneur selects a sole concern the continuity and stability would be uncertain as they depend upon the life cycle of the entrepreneur himself. Thus, the entrepreneur should select joint stock company and cooperative if he wishes continuity and stability and business.

Define business ownership. Briefly outline the structure of ownership of business.

Ans. Business ownership means having the control over a business enterprise and being able to dictate its functioning and operations.There are three ways in which business ownership may be acquired- initiating a business, purchasing a company that is already existing and franchising.

An organisation is a decision-making unit that sets out to achieve particular business objectives. A business organisation will produce a product or service that it sells to a market.

Sole trading concern: A sole proprietorship is a one-person business. You don't have to do anything special or file any papers to set up a sole proprietorship -- you create one just by going into business for yourself. Legally, a sole proprietorship is inseparable from its owner -- the business and the owner are one and the same. This means the owner of the business reports business income and losses on his or her personal tax return and is personally liable for any business-related obligations, such as debts or court judgments.

Partnerships: A partnership is simply a business owned by two or more people. You don't have to file any paperwork to form a partnership -- the arrangement begins as soon as you start a business with another person. As in a sole proprietorship, the partnership's owners pay taxes on their shares of the business income on its personal tax returns and they are each personally liable for the entire amount of any business debts and claims.

Joint stock company: Joint Stock Company is the business entity similar to both partnership business and a company. It is a voluntary association or an organization of many people who contributes money or money’s worth to a common cause. It is a company or association consisting of individuals organized to conduct a business for gain and having a joint stock of capital represented by shares owned individually by the members and transferable without the consent of the group.

Multinational company: Multinational company is an enterprise operating in several countries but managed from one (home) country. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation. Multinational companies are the business organization established in one country and functioning in many other countries. Such companies have branches in different countries and have the central office at the native country.

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Define Sole Trading Concern. Explain its features.

Ans. A sole trading concern is a form of business organization in which an individual invests only his capital, uses his own skill and intelligence in the management of its affairs and is entitled to all the profits as also is solely responsible for all the risks of ownership.

Single ownership: The sole trader is a single owner of the organization. The sole trader owns all the assets and property of the business. The sole trading concern is often referred as “one man show”.

Unlimited liability: The liability of the sole trader is unlimited. This means he is alone responsible for all the risks and debts of the firm.

Minimum government control: Sole trading concern is less affected by government control. This is because, there are almost no legal formalities are required to start or close down a business.

Business secrecy: The sole trader can maintain complete business secrecy. He needs not to publish any accounts and reports to anybody. Competitors cannot easily get business secrets and information of the sole trader’s activities.

Flexibility: Sole trader enjoys maximum flexibility. He can take right decision at the right time depending upon the situation. At any time, he need not have to consult with anyone because he is a single owner of his business.

No sharing of profit and losses: There is a direct relationship between efforts and rewards. This results in best possible efforts on the part of sole trader. Therefore, he can enjoy all the profits of his business.

Legal status: Legally, the sole trader and his business concern are one and the same in the eyes of law. The sole trader and his business cannot be separated from each other. So the sole trader lacks legal status.

Explain the advantages of sole trading concern.

The advantages of Sole trading concern are as follows:

Easy to Establish: Sole trading concern can be established very quickly and easily. Anybody who wants to start a business can do so, whenever, he likes. In Nepal, only nominal legal formality of registration is necessary.

Easy to Dissolve: Dissolution of sole trading concern equally simple. There are no legal formalities in this regard. Proprietor can dissolve business whenever he likes to do so.

Effective Control: In this form of business organization proprietor is responsible for all types of activities. He controls all functions and takes decisions at appropriate time. So, the business is controlled in an effective way. He controls all functions and takes decisions at appropriate time. So, the business is controlled in an effective way.

Direct Motivation: The direct relationship between effort and reward serves as a powerful incentive to the proprietor to manage the concern efficiently. The proprietor being entitled to the entire profits of the concern tries to maximize profits by utilizing his talents and activities in the best possible way.

Personal Supervision: The proprietor is able to supervise every work of the business himself. This helps to build up a close and cordial relationship with the employees. He can take personal interest in his customers and he can meet their individual and typical needs easily and adequately. It ensures effectively and economy in the operation.

Benefit of Unlimited Liability: The proprietor can obtain loan on his personal credit. The liability being unlimited, the creditors feel secure in extending credit.

Prompt Decision: The owner has full control over his business. So he is able to take decision promptly without consulting anybody. If more than one person is involved in decision making then delay is bound to occur.

Secrecy: The proprietor can maintain business secrets. There is no legal regulation regarding the disclosure of business information. So he can maintain secrecy from his competitors. Secrecy is very vital for business success.

Flexible: Sole trader enjoys the maximum flexibility in his/her business. If any change in business is required, he does not have to consult any one and can make the change without delay. No legal formalities are required for making changes in operations.

Explain the disadvantage of a sole trading concern.

Ans. The disadvantages of a sole trading concern are as follows:

Limited Capital: The capital of one proprietor is usually small. It is limited to his personal savings andborrowing on personal security. Hence, he cannot undertake further expansion and development lack of excess capital and fails to enjoy the internal and external economics of scale.

Limited Management: In the present competitive world, complexities of managerial jobsare increasing everyday. One man cannot be expert in each and every function of the business. For lack of resources he may not be able to use the services of experts. So limited managerial ability will hinder the growth of the firm.

Unlimited Liability: The unlimited liability of sole proprietorship is a great disadvantage. A loss in business may deprive the proprietor of his assets too. So big business firms requiring more economic risk are not established under this organization.

Uncertain Life: The success of this type of business depends on the personal capacity of proprietor. In case of his death business may be discontinued. The successors may not have the same degree of self-reliance and ability. Thus, there is no continuous existence of the firm.

No Large Economics and Specialization: A small scale business cannot economies in purchases, production and marketing. Similarly the benefit of specialization of service of experts cannot be obtained.

Loss in Absence: A sole trading has to suffer from the long illness of the proprietor. In his absence business comes to a standstill. This can lead to heavy losses. Employees may not be efficient or they may not take sincere interest.

Possibility of Wrong Decision: In sole trading a businessman alone makes all the decisions. Hence, decisions may not be always right and wise. When a considerable number of people are involved in decision-making process a wise and mature decision is possible.

Explain the effects of non- registration and non-renewal of a sole trading concern in Nepal.

Ans. If the sole trading concern is operated without registration and renewal then it is considered illegal. It can’t get loan from any financial institution, enter into any business contacts, submit tenders to corporate bodies, etc. This department will charge from Rs. 5 to Rs. 50 as fee. The firm should always be renewed within 35 days of every new fiscal year. If the firm is unable to perform the renewal process, the concerned department will charge a fine. The effect of non-registration and non renewal is, if the firm is not registered and renewed then fee is charged. If same action is done for 3 times, additional Rs. 10 is to be paid. If it is committed gain hen sol trading concern is closed and no any concern can be established under his name.

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Define sole trading concern. Explain its advantages and the disadvantages.

Ans. Sole trading concern is the oldest form of commercial organisation. Sole means one person. So a trading concern is an organization where all business activities are controlled and managed by one man. He is also solely responsible for the debt and risk of the firm. The following are some of the features of a sole trading concern.

A sole trading concern is a form of business organization in which an individual invests only his capital, uses his own skill and intelligence in the management of its affairs and is entitled to all the profits as also is solely responsible for all the risks of ownership.

“A sole trader is a person who trades on his own account rather than in partnership or as a member of a company.” – Michael Greener

The advantages of Sole trading concern are as follows:

Easy to Dissolve: Dissolution of sole trading concern equally simple. There are no legal formalities in this regard. Proprietor can dissolve business whenever he likes to do so.

Benefit of Unlimited Liability: The proprietor can obtain loan on his personal credit. The liability being unlimited, the creditors feel secure in extending credit.

The disadvantages of a sole trading concern are as follows:

Limited Capital: The capital of one proprietor is usually small. It is limited to his personal savings and borrowing on personal security. Hence, he cannot undertake further expansion and development lack of excess capital and fails to enjoy the internal and external economics of scale.

Limited Management: In the present competitive world, complexities of managerial jobs are increasing every day. One man cannot be expert in each and every function of the business. For lack of resources he may not be able to use the services of experts. So limited managerial ability will hinder the growth of the firm.

Explain the procedures of registration and renewal of sole trading concern in Nepal.

Ans. The procedures of registration and renewal of sole trading concerns in Nepal are as follows:

Apply for registration: Application form is needed to be filled up and apply for registration. The application must include the following things

a. Name of firm

b. Address of the firm

c. Objective of the firm

d. Name and address of owner including father and grandfather’s name.

e. Other particular things.

Rs. 5 and attached citizenship are required.

Deposit registration fee:Registration fee may or may not be deposited in the Nepal Rastra Bank. Voucher is needed for the deposit of registration fee. It should be enclosed in application form.

Capital

Registration fee

Renewal fee

Registration fee

Up to 1,00,000

From 1,00,001 to 3,00,000

From 3,00,001 to 5,00,000

From 5,00,001 to 10,00,000

Up to 10.00,001 to 50,00,000

Above 50,00.000

Rs 700

Rs 2100

Rs 4100

Rs 7600

Rs 10100

Rs 15100

Rs 100

Rs 125

Rs 150

Rs 200

Rs 250

Rs 300

Rs 700

Rs 2100

Rs 4100

Registration fee

Rs 700

Rs 2100

Receiving the certificate of registration:Concerned department receive the application. Then an authorized officer will examine. If satisfied then the form is approved and legal business can be operated.

Procedure of renewal:The entire registered firm should be renewed each year within 35 days of time period. He should fill application for renewal with renewal fee to the concerned department. This amount is dependent upon the capital invested.

3. Control: Sole trading concern has advantage of full control be the owner. He provides personal supervision. He has total authority and responsibility for business. Effective control is possible over the functioning of business.

4. Secrecy: The owner can keep secrecy about sales and financial performance. He is not required to publish accounts. Auditing is not compulsory. Secrecy helps to face competition. So, sole trading concern has advantage of secrecy.

5. Flexibility: Sole trading concern has advantage of flexibility. The owner can make changes in size and nature of business. Flexibility helps change the business with changing environment.

6. Personal satisfaction: Sole trading concern provides personal satisfaction to the owner. He is his own boss. He has independence to set his working hours. He is motivated to work hard for more profit.

7. Customer relation: The sole trader develops personal relationship with customers. This helps increase customer loyalty. Customers become life-long customers for business. Customers' complaints can be handled promptly.

One man control is the best in the world if that man is big enough to manage everything.” Elaborate.

Ans. “one man control is the best in the world if that man is big enough to manage everything.” A dynamic and efficient individual is all that takes to control a sole trading concern. If the individual is competent enough to manage a business, one-man control will be the most effective management. A single individual control is considered the best way to manage a business because sole trading concern can be established very quickly and easily. Anybody who wants to start a business can do so, whenever, he likes. In Nepal, only nominal legal formality of registration is necessary.Dissolution of sole trading concern equally simple. There are no legal formalities in this regard. Proprietor can dissolve business whenever he likes to do so. In this form of business organization proprietor is responsible for all types of activities. He controls all functions and takes decisions at appropriate time. So, the business is controlled in an effective way. He controls all functions and takes decisions at appropriate time. So, the business is controlled in an effective way.Direct Motivation: The direct relationship between effort and reward serves as a powerful incentive to the proprietor to manage the concern efficiently. The proprietor being entitled to the entire profits of the concern tries to maximize profits by utilizing his talents and activities in the best possible way.Personal Supervision: The proprietor is able to supervise every work of the business himself. This helps to build up a close and cordial relationship with the employees. He can take personal interest in his customers and he can meet their individual and typical needs easily and adequately. It ensures effectively and economy in the operation.Benefit of Unlimited Liability: The proprietor can obtain loan on his personal credit. The liability being unlimited, the creditors feel secure in extending credit.The owner has full control over his business. So he is able to take decision promptly without consulting anybody. If more than one person is involved in decision-making then delay is bound to occur.The proprietor can maintain business secrets. There is no legal regulation regarding the disclosure of business information. So he can maintain secrecy from his competitors. Secrecy is very vital for business success. Sole trader enjoys the maximum flexibility in his/her business. If any change in business is required, he does not have to consult any one and can make the change without delay. No legal formalities are required for making changes in operations.

A sole proprietor wants to expand his business. Would you advise him to enjoy a paid assistant or take a partner? Give reason for you answer.

I would advise him to take a partner as a partnership will allow him the following advantages.

Availability of grater capital: Since, partnership firm has two or more partners, it has the greater source of capital.

Easy Formation: Registration is not compulsory in the case of Partnership firm. It can be formed without any legal formality and expenses. Thus they are simple and economical to form and operate.

Better Management:Business of a partnership firm is very well managed by all the partners as they take interest in the daily affairs of business because of the ownership, profit and control.

Sharing of Risk: In partnership every partner bears the risks individually as it is easier compared to sole proprietorship.

Better performance: As there is more than one owner in partnership, all the partners are involved in decision making.

Page 9

Define a partnership firm.

Ans. When two or more individuals agree to manage or operate a business organization by sharing a common profit can be known as partnership firm. It is a business organization with a legal form of operation between several individuals who shares profit and loss of the organization. Persons who have entered into partnership with one another are called individually partners and collectively a firm, and the name under which their business is carried on is called the firm name.

According to J. L. Hanson, “a partnership is a form of business organisation in which two or more persons up to a maximum of twenty join together to undertake some form of business activity”.

Explain the features of partnership firm.

Ans. Partnership is defined as a relation between two or more persons who have agreed to share the profits or loss of a business. Its main features are:

Two or more person: The minimum number of partners must be two, while the maximum number can be 10 in case of banking business and 20 in all other types of business.

Shares profit and loss: the profit and loss made by the business are shared among the partners of the business organization.

Contractual Relationship: Partnership is formed by an agreement-oral or written-among the partners.

Unlimited Liabilities: Liability of the partners is unlimited. Legally, the partners are said to be jointly and severally liable for the liabilities of the firm.

Restrictions on Transfer of Share: No partner can transfer his share to any outside person without seeking the consent of all other partners.

Explain the advantages of partnership firm.

Ans. The advantages of partnership firm are:

Availability of grater capital: Since, partnership firm has two or morepartners, it has the greater source of capital.

Easy Formation: Registration is not compulsory in the case of Partnership firm. It can be formed without any legal formality and expenses. Thus they are simple and economical to form and operate.

Better Management:Business of a partnership firm is very well managed by all the partners as they take interest in the daily affairs of business because of the ownership, profit and control.

Sharing of Risk: In partnership every partner bears the risks individually as it is easier compared to sole proprietorship.

Better performance: As there are more than one owner in partnership, all the partners are involved in decision making.

Explain the disadvantages of partnership firm.

Ans. The disadvantages of partnership can be explained as follows:

Unlimited Liability: In partnership firm, the liability of partners is unlimited. Just as in proprietorship, the partners’ personal assets may be at risk if the business cannot pay its debts.

Continuity: Continuity of the partnership may come to an end if the partner withdraws from the business or death occurs.

Lack of Harmony: According partnership agreement every partner has equal rights. Some situations might occur in which one or the other partner will not agree on the same thing which will cause difference of opinion resulting mistrust and disharmony among the partners.

Legality: A partnership firm does not have a legal status like a Joint Stock Company.

Transfer of ownership: In a partnership firm it is not easy to transfer ownership. Consent of every partner is required in order to transfer ownership.

Explain about the types of partnership.

Ans. The types of partnership firm can be explained as:

Partnership-at-Will: A partnership is called partnership-at-will when (a) the partnership is formed to carry on business without specifying any period of time, and (b) no provision is made as to when and how the partnership will come to an end. The life of such a partnership continues as long as the partners are willing to continue it as such. It can be dissolved by any partner giving a notice to the firm withdrawing from the partnership or terminating the partnership.

Particular Partnership: A partnership established for a stipulated period or for the completion of a specified venture comes to an automatic end with the expiry of the stipulated period or on the completion of the specified venture, as the case may be.

Joint Venture: It is organized for completing a specific task or venture during a specific period. A joint venture is a partnership without the use of a firm name, limited to particular venture in which the persons concerned agree to contribute capital and to share profits or losses. It may involve joint consignment of goods, an underwriting transaction, a speculation in shares, construction of a building, or any similar form of enterprise.

Limited Partnership: In limited partnership, the liability of the partners is limited except that of one or more partners. The partners whose liability is limited to the extent of capital contributed by them are referred as ‘limited partners’ or ‘special partners.’

Differentiate between limited and unlimited partnership.

Ans.

Limited partnership	Unlimited partnership
It is the type of partnership under which the partners have limited liability.	It is the type of partnership under which the partners have unlimited liability.
In the limited partnership at least one unlimited partner is required to control the activities of the firm.	In an unlimited all partners have equal right to control the activities of the firm.
Limited partnership is also known as special partnership.	Unlimited partnership is also known as general partnership.
The death, insolvency, lunacy of a limited partner does not affect the activities of the firm.	The death, insolvency, lunacy of a limited partner affects the activities of the firm.
Under limited partnership the limited partners have no right to make decisions and close the firm.	Under unlimited partnership the limited partners have the right to make decisions and close the firm.

Mention the contents of partnership deeds.

Ans. Partnership firm can be established with an agreement between the partners. This agreement may be written or oral. An oral agreement may be the cause of dispute in future. So, it is better to have a written agreement in order to avoid future conflicts. The written agreement duly signed by the partners is known as partnership deed or agreement or Articles of Partnership.

Content of partnership deed

Name and address of the firm

Name and address o the partners

Nature of rim’s business

Duration of partnership

Amount of capital invested by the partners.

Interest on capital

Division of profit

Salary and commission

Right and duties of partner

Admission and removal of partnership

Valuation of capital and goodwill at the time of admission, death and retirement of partners

Accounts and audits

Dissolution of partnership.

Differentiate between sole trading concern and partnership firm.

Ans. Difference between sole trading concern and partnership firm are:

Base	Sole trading concern	Partnership
Definition	It is a business organization which is owned and run by one or sole individual.	It is a business organization which is owned or run by two or more than two individuals.
Capital	One person is responsible for providing the capital.	All the partners contribute towards capital of the firm.
Secrecy	Secrecy is maintained in the full extent.	Secrecy is kept among the partners of the business.
Risk	Risk is beard by single person running the business.	Risk is shared among the partners of the organization.
Management	One person controls over the management.	All partners equally participate control over the management.

Explain the relations of partnership with its third parties.

Ans. According to Partnership Act the relationship of partners with the third parties are as follows:

Right to Represent: Each partner can represent the firm as per partnership deed and the firm is liable to the acts of such partner. If a partner committed forgery then the other partner can deprive his right through the authorized court.

Firm will liable: The right of a partner can be restricted by partnership deed. If third party has no knowledge about the restriction then the firm will be liable to the acts of each partner.

Responsibility: Each partner is responsible jointly or personally for acts done on behalf of firm while he is a partner.

New Partner is not responsible: A new partner is not responsible for the acts done before his entry as partner. The outgoing partner will be free with the consent of concerned third party and remaining partners. The outgoing partner will not held liable for the acts done by other partners if third party had knowledge about his departure from partnership.

Transfer of Ownership: If a partner has transferred or mortgaged his ownership even then he can claim his share of profit such person will not be a partner and he cannot inspect the accounts of the firm without the consent of all partners.

10.

Explain the effects of non-registration and non-renewable of partnership firm in Nepal.

Ans. Effects of Non-Registration of a Firm are:

Unregistered partnership firm cannot file a suit against a third party

A partner of an unregistered partnership firm cannot file a suit against another partner of the same firm.

Partner of an unregistered partnership firm cannot use the firm for claims.

Unregistered partnership firm cannot file a suit against the partners of that firm.

If unregistered partnership firm found operating, the concerned department will impose fine of Rs.50 to each partner.

Above all the transactions of an unregistered firm have no legality.

Page 10

What is partnership firm? Explain its advantage and disadvantages.

Ans. A business organization, which owned and run by two or more individuals agreeing to certain terms and condition sharing profit and loss of the business, can be defined as partnership firm. When two or more individuals agree to manage or operate a business organization by sharing a common profit can be known as partnership firm. It is a business organization with a legal form of operation between several individuals who shares profit and loss of the organization. Persons who have entered into partnership with one another are called individually partners and collectively a firm, and the name under which their business is carried on is called the firm name.

According to J. L. Hanson, “a partnership is a form of business organisation in which two or more persons up to a maximum of twenty join together to undertake some form of business activity”.

According to Nepal act 2020 (1964) - Any business registered in a record of the Government of Nepal by the persons who have agreed to share the profit of the business carried on by them in a single name under an agreement made with each other which entitles all partners to take part in all business for each partner or entitles any of them for the same on behalf of all others.

The advantages of partnership firm are:

Availability of grater capital: Since, partnership firm has two or more partners, it has the greater source of capital.

Easy Formation: Registration is not compulsory in the case of Partnership firm. It can be formed without any legal formality and expenses. Thus they are simple and economical to form and operate.

Better Management: Business of a partnership firm is very well managed by all the partners as they take interest in the daily affairs of business because of the ownership, profit and control.

Sharing of Risk: In partnership every partner bears the risks individually as it is easier compared to sole proprietorship.

The disadvantages of partnership firm are:

Unlimited Liability: In partnership firm, the liability of partners is unlimited. Just as in proprietorship, the partners’ personal assets may be at risk if the business cannot pay its debts.

Continuity: Continuity of the partnership may come to an end if the partner withdraws from the business or death occurs.

Lack of Harmony: According partnership agreement every partner has equal rights. Some situations might occur in which one or the other partner will not agree on the same thing which will cause difference of opinion resulting mistrust and disharmony among the partners.

Legality: A partnership firm does not have a legal status like a Joint Stock Company.

Transfer of ownership: In a partnership firm it is not easy to transfer ownership. Consent of every partner is required in order to transfer ownership.

Explain the different types of partner.

Ans. The different types of partner are as follows:

Active Partner: A person who takes active part, in the affairs and management of the business is called active partner. He contributes his shares in the capital and is also liable to pay the obligations of firm.

Nominal Partner: He is not in reality a partner of firm but his name is used as if he is a member of the firm. He is not entitled in the profit or loss of the business but he is liable to all the acts of the firm. The person who has good prestige and status is given, the position of nominal partner.

Secret Partner: He is active in the running life of the firm but public does not know him as partner of the firm. He pays his share in the capital and is liable to settle the creditors of the firm.

Minor Partner: There is no restriction to join the minor in the partnership by law. Although he may become partner but with the consent of all existing partners. In this case, he can be admitted to the profits of the firm only but not losses. He is not personally liable for the obligations of the firm. But minor has the right to inspect and copy .the accounts of the firm. Within six months of his attaining maturity, he has to give public notice whether he wants to remain partner or not. After his decision, he will deemed as fully fledged partner.

Quasi Partner: A person who has retired from the running management life of the firm but he does not withdraw his capital from the business is known as quasi-partner. So his capital is considered as a loan and he receives interest at the rate varying with the profit. Really he is not a partner but he is a Deferred Creditor.

Holding out Partner (Estoppels partner):A person who declares by word of mouth as partner of the firm is called holding out partner. In reality he is not a regular partner so he is not entitled to receive share of profit. Such persons are liable to those parties who have given credit on the faith of such representation.

Incoming Partner:A person who is newly admitted to the firm with the consent of all the parties is called incoming partner. He is not liable for any act of the firm done before he became a partner unless he agrees;

Partners in Profit Only: He is an individual who gets a share of the profits only without being liable for the losses. He does not participate in the management of the business. He will be liable to outsiders for all acts of the firm.

Limited Partner: A person who has not to pay any obligation more than the share he holds in the firm is called limited partner. He cannot take part in the management of the firm. This kind of partner exists in limited partnership. But this organization is rare in our country.

Explain the right and duties of partner.

Ans. followings are some of the rights of a partner:

Every partner has a right to take active part in the management and administration of the firm.

The books of accounts of the firm must be kept at the principal place of business and every partner has a right to have access to the accounts of the firm and he can have a copy of accounts.

Every partner has a right to continue in partnership.

Every partner has right to retire according to agreement or consent of all partners.

Every partner has a right to share profit and losses equally in the absence of partnership deed.

If a partner has given any loan or advance to the firm, he is entitled to interest on loan at 6 percent p.a.

Every partner has a right to prevent admission or retirement of a partner.

A partner is not liable for any activities in the firm before his admission.

Every partner has a right to sue for dissolution of the firm.

The partners have a right to do all such acts in the time of emergency which would protect the firm from losses.

Every partner has a right to be indemnified by the firm for the payment made or liabilities incurred by him in the ordinary course of conduct of the business.

The outgoing partner has a right to carry on similar business operations without the use of firm's name.

The following are the main duties of partners:

Every partner is bound to carry on the business of the firm to greater advantage.

Every partner has a duty to work hard and conduct the business in the best and common interest of the firm.

A partner shall not carry on any business competing with firm's business.

Every partner is bound to keep and render proper books of accounts.

Every partner has a duty to contribute equally for the losses incurred by the business.

Every partner has a duty to attend diligently to his duties and render true accounts and information.

Every partner is bound to use the property of the firm exclusively for the partnership business.

No partner can transfer his interest in the firm except with the consent of all partners.

Every partner is bound to act honestly, faithfully and diligently for the conduct of the business.

Explain the conditions in which a partnership firm is dissolved in Nepal.

Partnership is a contract between some partners. Dissolution means closure of partnership business. According to Partnership Act, partnership will be dissolved under the following conditions.

Dissolution by Agreement: Partnership is created by the agreement. Similarly existing partners can dissolve by another agreement.

Dissolution of Notice: When the partnership business has no fixed time or it is at will, any partner can dissolve the firm the firm by giving a written notice to all partners. Dissolution will be effective as mentioned in the notice.

Dissolution at Any Time: In spite of partnership deed, partnership can be dissolved at any time under the following conditions: a. If a partner becomes unable to take up his responsibility as per the partnership deed. b. If a partner did not pay the amount payable to the firm or transfers his share to another person without the consent of remaining partners. c. If the right of a partner is taken over by a court for compensation. d. If any partner committed forgery of negligence.

e. If any partner is sentenced to prison.

Dissolution after the Expiry of Time: As per the partnership deed a partnership will be automatically dissolved immediately after the expiry of the fixed period or on the completion of the specified job.

Immediate Dissolution: The death of insolvency of any partner will immediately dissolve the partnership.

Dissolution by Concerned Department: The concerned department can dissolve the firm under the following conditions: a. If the firm is not renewed within a prescribed time. b. It the partners apply in the concerned department for dissolution with reasonable causes. c. If the firm does not provide accounts and progress report within specified period when demanded. d. If the firm operates unlawful works or violates the rules and regulation of the Act.

If concerned department dissolves partnership firm except in case (b), the partners of the firm cannot register similar type of partnership for one year.

Explain the procedure for the registration and renewal of a partnership firm in Nepal.

Ans. Registration of a partnership firm is legally compulsory in Nepal. According to the Partnership Act 2020 (1964), every partnership firm should be registered in the books of concerned department within the six months from the date of its formation. If the partnership is not registered within the prescribed date the work and transactions do not have legality according to Act.

Registration of partnership firm in Nepal is compulsory according to Partnership Act. The procedure for the registration of a partnership firm is very simple. It can be registered at any time. According to Partnership Act, it can be registered within the six months from the date of its formation. A procedure for getting a firm registered is as follows:

Filling an Application: For registration the partners have to submit an application with the prescribed fees to the concerned department. The application for registration should contain the following particulars: 1. Full name of Firm. 2. The principal place of business. 3. Statement of work or services to be carried on and objective of the firm. 4. The names in full and permanent address of the partners. 5. Type of partner and amount of capital each partner is to invest. 6. Name of partner representing the firm. 7. Method of sharing profit and loss. 8. Procedure of determining profit and loss. 9. Restriction imposed upon the authority of the partner, if any. 10. Duration of the firm. 11. Other particulars as prescribed by the concerned department.

While submitting the application to the concerned department, it should be duly signed by all the partners. The application form also should be attested by one gazette Government. The name of the firm should not be similar to the other firms, which had already been registered

Necessary Documents and Registration Fee: With the application, partnership deed must be enclosed . Attested copy of citizenship certificate of each partner should also be enclosed in the application. Registration fee should be deposited in Nepal Rastra Bank and the voucher of if should also be enclosed. For commercial business a recommended letter from Nepal Chamber of Commerce should also be enclosed in the application.

Certificate of Registration: When the concerned department received the application for registration, authorized officer of the concerned department will examine and scrutinize the particulars of the application and all the documents attached with the application form. If the concerned department is satisfied with the application the firm will be registered. Department will issue the ‘Certificate of Registration’.

Registration Fees :The amount of registration fees depends upon the amount of capital invested in the business. The registration fees according to capital invested are as follows:

a. Capital up to Rs.20, 000 -Rs.50 b. Capital from Rs.20, 001 up to Rs.50, 000 -Rs.100 c. Capital from Rs.50, 001 up to Rs.1, 00, 000 -Rs.250 d. Capital from Rs.1, 00, 001 up to Rs.3, 00, 000 -Rs.850 e. Capital from Rs.3, 00, 001 up to Rs.5, 00, 000 -Rs.1,400 f. Capital from Rs.5, 00, 001 up to Rs.10, 00, 000 -Rs.3, 000 g. Capital from Rs.10, 00, 001 up to Rs.50, 00, 000 -Rs.4, 500 h. Capital more than Rs.50, 00, 001 -Rs.6,800

Renewal of the Partnership:According to the Partnership Act, once a partnership firm is registered, it should be renewed each year within 35 days after the completion of fiscal year. For the renewal of the firm, partners must fill the prescribed form for renewal and submit in the concerned department with the necessary renewal fee. The amount of renewal fees also depends upon the capital invested. The renewal fees are as follows:

a. For the firm with the capital up to Rs.50,000 - Rs.30 b. Capital from Rs.50, 001 up to Rs.1,00,000 -Rs.45 c. Capital from Rs.1,00, 001 up to Rs.3,00,000 -Rs.60 d. Capital from Rs.3,00, 001 up to Rs.5,00,000 -Rs.85

e. For the firm with the capital up to Rs.50,00,001 -Rs.150

Page 11

What is Joint Stock Company? Discuss its main characteristics.

Ans. The definition of Joint Stock Company lies between the definition of partnership and co-corporation.A joint stock Company is a business organization where the stock of the company are bought and owned by the shareholders jointly. It is a company, which has some features of a corporation and some features of a partnership. The company sells fully transferable stock, but all shareholders have unlimited liability.

A joint stock company issues shares similar to a public company that trades on a registered exchange. Joint stock holders may buy or sell these shares freely in the market. But unlike ordinary shares or preferred shares, the shares of a joint stock company carry explicit obligations. Holders have a direct vote in company management decisions as well as a joint and several liabilities for the company's outstanding debts.

According to W.A. Wood “Joint Stock Company is a person created by law, separated and distinct from its stock holders and in certain sense, its citizens.”

Characteristics of Joint Stock Company are:

Artificial person:a joint stock company is an artificial person and enjoys the facility of natural person in certain aspects.

Separate legal entity: Being an artificial person, a joint stock company has its own separate existence independent of its members. It means that a joint stock company can own property, enter into contracts and conduct any lawful business in its own name.

Perpetual existence: A joint stock company continues to exist as long as it fulfills the requirements of law. It is not affected by the death, lunacy, insolvency or retirement of any of its members.

Limited liability: The liability of shareholders of the company is limited up to their capital investment.

Freely transferable shares: the shares of the joint stock company are easily transferable from one person to another without prior permission from company.

Democratic management: Joint stock companies have democratic management and control. That is, even though the shareholders are owners of the company, all of them cannot participate in the management of the company.

Discuss the types of company on the basis of incorporation.

Ans. Types of company on the basis of incorporation are:

Chartered company: A chartered company is the company established by the special charter royal or by the head of the nation. It has some extent of powers granted by the higher authority. These types of companies are rarely formed now a day. The Bank of England, Charter Bank of Australia, etcare some example of chartered company.

Statutory company: A company established by passing law in the parliament can be known as statutory company. It is established by special act passed by the parliament. A statutory company is generally formed run enterprises of national importance.

Registered company: Companies established under the company act of the country can be termed as registered company. In Nepal companies are registered under the provision of company act, 2021.

What are the advantages of Joint Stock Company?

Ans. Advantages of Joint Stock Company are:

Limited liability: The liability of shareholders of the company is limited up to their capital investment. The company can borrow loan for expansion and diversification of business or purchase goods on credit during regular business.

Perpetual Existence: A company is an artificial legal person created by law, which has its own independent legal status. Its existence is not affected by the death or insolvency of its members.

Transferability of shares: the shares of the joint stock company are easily transferable from one person to another without prior permission from company. Such transfer of shares doesnot affect the regular function of the company.

Large-scale production: Due to the availability of large financial resources and technical expertise it is possible for the companies to have large-scale production. It enables the company to produce more efficiently and at lower cost.

Contribution to society: A joint stock company offers employment to a large number of people. It facilitates promotion of various ancillary industries, trade and auxiliaries to trade. Sometimes it also donates money towards education, health and community services.

Divided risk: there are many shareholders in a joint stock company who buys shares of the company. So the risk of the company is divided among the shareholders.

What are the disadvantages of the joint stock company? Explain.

Ans. Disadvantages of the joint stock company are:

Lack of secrecy: secrecy is an important aspect of a business. A joint company cannot maintain the secrecy. It has to publish its financial matters through the various newspapers and magazines.

Excessive government control: Joint stock companies are regulated by government through Companies Act and other economic legislations. Particularly, public limited companies are required to adhere to various legal formalities as provided in the Companies Act and other legislations. Non-compliance with these invites heavy penalty. This affects the smooth functioning of the companies.

Delay in policy decisions: Generally policy decisions are taken at the Board meetings of the company. Further the company has to fulfill certain procedural formalities. These procedures are time consuming and therefore, may delay action on the decisions.

Conflict of interest: many people, many thoughts, in joint stock company there are many groups like; shareholders, employees, promoters, etc. each of the group wants to fulfill their own interest which are contradict to each other.

Formation is not easy: To act as a legal entity a company has to fulfill various legal and procedural formalities making it a complicated process.

Double Taxation: This is the biggest disadvantage faced by the company. Firstly, company needs to pay tax for the earned profits and again the shareholders are taxed for the earned income.

Explain the types of joint stock company on the basis of liability.

Ans. The types of joint stock Company on the basis of liability are:

Limited company: A limited liability company is a company whose liability of each member is limited to the face value of the shares held by him and the capital of the company is divided into a number of shares.

Unlimited company: In these companies the liability of the shareholder is unlimited as in partnership firms. Such companies are permitted under the companies Act but are non-existent.

Company Limited by Guarantee: In Such a company, each member promises to pay a fixed sum of money in the event of liquidation of the company. This amount is called the guarantee. Sometimes the members are required to buy a share of a fixed value and also give a guarantee for a further sum in the event of liquidation. There is no liability to pay anything more than the value of the share (where there is a share) and the guarantee.

Describe the contents of the memorandum of Association.

Ans: Memorandum of Association is the most important document to be prepared by the company. As per the provision of section 18 of Company Act, 2063, memorandum should contain the following informations:

Name clause:This is the first clause of the Memorandum of Association which contains the name of the company with the word ‘limited’ at the end. If the company is public,, words ‘public limited’ should be written in its name and if the company is private, words ‘private limited’ should be written in its name. Certain criterions are to be fulfilled to create a company name. They are: the name should not be identical with other company in the country; use of undesirable words is prohibited.

Situation or domicile clause:This clause of the Memorandum of Association contains the name and place of the company and shows the place where the registered office of the company is located. This is important as all the legal and important documents are kept in the registered office.

Objective clause:Objective or object clause is the most important clause of Memorandum of Association. It defines the scope of the company. A company is established with its own set of certain objectives. This clause allows them to do the activities allowed by the government. Thus this clause contains information about the objectives of the company.

Liabilities clause:The liabilities clause talks about the liability the shareholders. It states that the liability of every member is limited to the face value of their shares.

Capital clause: The capital clause mentions the total amount of authorized share capital. The different types of shares to be issued along with their face value are stated in this clause.

Association or subscription clause: The promoters of the company sign in the memorandum for the formation of the company in this clause. It mentions the names and addresses of subscribers. The subscribers express their consent in forming the company by agreeing to buy the necessary shares for becoming the subscribers of the company. In private company at least one subscriber should be present whereas public company requires 7.

List out the main documents of Joint Stock Company.

Ans: The main documents required for the formation of a joint stock company are as follows:

Memorandum of Association

Articles of Association

Prospectus

Mention the power and duties of the board of directors.

Ans: The company act 2063, grants the following rights and duties to the Board of Directors:

To declare the rate of dividend each year.

To appoint the employees as per the requirement of the company.

To raise or issue debentures.

To make all the arrangements regarding the operation of the company and exercise its rights and duties according to the company act.

To not make any personal benefits except the facility provided to them by the meeting.

To not act in any way beyond the rights given to the board of directors.

Distinguish between a private limited and public limited company.

Ans: There are many differences between private and public company limited which are given below:

Bases of difference	Private limited company	Public limited company
1. Number of members	A private limited company can be established by a single person and members should not exceed 50.	A public limited company at its incorporation requires at least 7 members but the membership is unlimited.
2. Commencement of Business	It can commence business after getting ‘certificate of incorporation’.	It requires the ‘certificate of incorporation’ plus ‘certificate of commencement of business’ to commence its business.
3. Prospectus	It does not require issuing prospectus for inviting people to subscribe to its shares.	It must issue prospectus for inviting people to subscribe to its shares.
4. Transfer of shares	Transfer of share is not common unless there exists a mutual understanding between the shareholders.	Transfer of share is very common and not restricted.
5. Statutory meeting	Private limited companies do not need to hold statutory meetings.	Public Limited Companies needs to hold statutory meetings.
6. Publication	It doesn’t have to publish its financial statements on an annual basis.	It has to publish its financial reports on an annual basis.
7. Directors	Appointment and term of the directors will be mentioned in the articles of the company.	The public company requires at least 3 directors and maximum 11 with tenure of 4 years.
8. Use of word	The word ‘Pvt. Ltd.’ Must be used after its name.	The word ‘Ltd.’ Should be used after its name.

10.

What is resolution? Discuss the various types of resolutions.

Ans: Resolution simply can be defined as formal decision arrived through voting. An organization is always needs decisions to carry out business in a systematic manner. Before any decisions are selected, possible proposals are put forward in a meeting where the members arrive at a particular decision as the ultimate one. Thus, a proposal when put forward in a meeting is passed it becomes a resolution.

Likewise the dictionary defines Resolution as,” The act of presenting problems or suggestions for definite objective or opinion presented in the meeting by the committee and society for planning, programming, etc”.

According to the company resolutions can be divided into two types as follows:

Ordinary resolution: Resolutions which are presented in every board meeting or annual general meeting and can be decided through simple majority are known as ordinary resolutions. An ordinary resolution is passed by shareholders with more than 50 percent of the company’s shares. General activities such as declaration of dividend, appointment of director and auditor, presentation of audited profit and loss account of previous year and so on require an ordinary resolution.

Special resolution: Resolutions which are presented for special issues and can be only decided through special majority i.e.75 percent are known as special resolutions. Special resolution is decided as per the clauses mentioned in the Memorandum and Article of Association of the company. They are passed in annual general meetings or special general meetings. Examples of special resolutions include: issue of bonus shares, increase and decrease in capital, changing the name and address of the company and so on.

11.

Discuss in brief, about agenda and resolutions of a company.

Ans: The word ‘Agenda’ in simple term means things to be done. However, in business term agenda is defined as the programs and subjects that are to be discussed in the meeting. It primarily contains the list of things to be done and discussed in the meeting. An agenda should always be clear and free from ambiguity. Vague and ambiguous agendas create difficulty in discussions and decisions cannot be arrived upon.

Resolution simply can be defined as formal decision arrived through voting. An organization is always needs decisions to carry out business in a systematic manner. Before any decisions are selected, possible proposals are put forward in a meeting where the members arrive at a particular decision as the ultimate one. Thus, a proposal when put forward in a meeting is passed it becomes a resolution.

According to the company resolutions can be divided into two types as Ordinary resolution and Special resolution.

12.

Make a distinction between a partnership and joint stock firm.

Ans: The differences between a partnership and joint stock firm are explained below:

Bases of difference	Partnership firm	Joint stock firm
Number of persons	It should have at least two partners and the maximum numbers is not mentioned in the partnership act.	It should have at least 1 member and maximum 50 in private company whereas no. of shareholders in public company should be more than 7.
Registration	Partnership firms are registered under the partnership act, 2020.	Joint stock firms are registered under the company act, 2063.
Liability	The partners of the partnership firms are obliged to all the liabilities. Their liability is unlimited.	The shareholders are obliged to pay liability on the basis of shared they hold. Their liability is limited.
Transfer of shares	The partners can transfer their shares only if all the partners agree.	The shareholders can buy and sell their shares as they wish.
Management and control	The partnership firm is managed and controlled by the partners themselves.	The joint stock firm is managed and controlled by the representatives of shareholders i.e. the board of directors.
Existence	The partnership firm may get dissolved if a partner dies, goes bankrupt, and retires and so on.	A joint stock company never dies. Members come and go but the firm exists forever.
Dissolution	No legal formalities are required for the dissolution of a partnership firm.	A joint stock firm can be dissolved by following necessary procedures as mentioned by the law.
Legal entity	A Partnership firm is not a separate legal entity distinct from its members.	A joint stock firm has a separate legal status. It can perform business activities in its own name.
Legal obligations	A partnership firm is not obliged to legal obligations such as publishing reports, compulsory maintenance of books of accounts and so on.	A joint stock firm is legally obliged to perform tasks such as publishing reports, compulsory maintenance of books of accounts and so on.

Page 12

Discuss the main contents of the Article of Association.

The Memorandum of Association sets the objective of the organization. After that, rules and regulations are to be set to achieve the objectives. Thus, the Article of Association is the document, which contains the rules and regulations. It consists of the regulations and by-laws for governing the internal affairs of the company. The contents in the Article of Association should not contradict with the contents of Company Act and Memorandum.

The Article of Association defines what is to be done to achieve the objectives of the company. According to company Act, 2063, the following particulars should be included in the Articles of Association:

Name of the directors and their tenure in the office.

Privileges and restrictions to the preference shareholders.

Minimum number of shares to be subscribed by the directors.

The procedure for calling company meeting and notice to be given.

Rights and duties of the managing director.

Provisions relating to remuneration, allowances and facilities of directors.

All the matters mentioned in the Memorandum of Association.

Other necessary particulars.

Company can change any clause of articles of association passing special decision with approval through the company registrar’s office’s approval.

What do you mean by prospectus? Discuss the main contents.

The registration of a company is to be followed by the capital raising procedure. To raise capital for the company, shares and debentures are issued. Thus, prospectus is the document created to issue public notice, circular or advertisement to invite public for the purchase of the securities of the company. It invites the public to buy the company’s shares and debentures. The prospectus also includes general information about the company, previous and projected income statement and balance sheet. The prospectus should be signed and dated by the promoters of the company. According to the company Act, 2063 a prospectus should contain the following matters:

The main clauses mentioned in the Memorandum and Articles of association.

Number of subscriptions available to the director plus their salaries and allowances.

Description of cash receipt as remuneration or reward by the promoters.

Provisions relating to bonus shares.

Provisions, if any, regarding reservation of shares for any shareholder, employee or other persons.

Names and addresses of the directors and number of shares subscribed.

Number of shares to be issued to the general public whether at par or premium.

Minimum number of shares to be subscribed and advance payment along with the application.

Brokerage on shares and debentures.

Net worth of the company.

Estimated expenditure and income of the company for at least three years.

Name and address of the auditor and audit report, if any.

Date of opening and closing of subscription list.

The balance sheet and P/L account of the company and time and place for inspecting them.

Details of underwriting of shares and commission of their earning.

Other necessary particulars.

Discuss about the management of a company.

The distinctive feature of the Joint Stock Company is that the management is separate from the owners. But we do not find such distinctiveness in sole trading and partnership firms. The ownership, management and control are united under one individual.

The shareholders of the company are the actual owners of a joint stock company. However, it is not feasible for all the shareholders to exert their control over the company. So, instead they elect a set of competent individuals for the purpose of conducting day to day operations of the company. Such group of individuals is referred as the board of directors and individual of the group is known as a director.

The Board of Directors then appoints a chief executive who under the guidance of the board is engaged in managing the company. The chief executive also appoints functional managers to assist him in management of the company. The various functional managers appointed by the chief executive include the production manager, marketing manager, sales manager, personnel managers and other departmental managers. These functional managers are responsible for certain departmental tasks assigned to them. For instance, the personnel manager is responsible for the human resources of the organization whereas the production manager is responsible for the production of quality goods.

Discuss, in brief, about the various types of shareholders meeting.

The shareholders are the true owner of the company. They take major decisions during the meeting. According to Company Act, 2063, shareholders meeting are classified into the following three types:

Preliminary general meeting

Annual General meeting

Special\Extraordinary general meeting

Preliminary general meeting

Preliminary general meeting is the first general meeting of shareholders after the establishment of the company. The main purpose of such meeting is to provide information about the prospects of the company to its members. This meeting approves the clause mentioned in the prospectus. According to the Company Act, 2063, the Preliminary general meeting should be held within one year after the date of receiving certificate of commencement of business. The members are provided with each and every information of the company such as share allotted, cash received, expenditures, properties and so on. A written notice along with venue, date and time of meeting is to be sent to all the members before 21 days and a statutory report signed by at least 1 director must be sent to all shareholders. A preliminary report should contain all of the following information:

Allotment of total number of shares.

Number of fully or partially paid-up shares out of the allotted shares.

Total amount received on shares.

Details of expenses made and income received up to before 35 days.

Names and addresses of directors, managers, company secretary, accountants and auditors and their appointment and terms & conditions of service.

Details of agreement which are to be placed in the meeting for amendments.

Descriptive report of underwriting of shares.

Calls in areas of shares with the directors.

Other necessary information.

Annual General meeting

The shareholders meeting organized every fiscal year are known as annual general meeting. According to the Company Act, 2063, the annual general meeting is to be held within the six months after the completion of fiscal year. This meeting aims to update shareholders about the performance of the company. It provides information about the future plans and programs of the company. Note of such meeting is given 21 days before mentioning the date, time and venue of the meeting. For a public company, publishing information about the meeting in a national newspaper is a must.

Special\Extraordinary meeting

Special or extraordinary meeting is conducted for important and urgent subjects that were not presented in previous annual general meeting. This type of meeting is called when urgent decisions are to be made regarding important matters. Notice is circulated to the shareholders mentioning the date, time and venue 15 days before the meeting. According to the Company Act, 2063, a special meeting can be called by: Board of directors, Auditor, Shareholders and company registrar’s office.

What do you mean by resolution? Discuss the various types of resolution.

Ans. Resolution simply can be defined as formal decision arrived through voting. An organization is always needs decisions to carry out business in a systematic manner. Before any decisions are selected, possible proposals are put forward in a meeting where the members arrive at a particular decision as the ultimate one. Thus, a proposal when put forward in a meeting is passed it becomes a resolution.

According to the company resolutions can be divided into two types as follows:

Discuss the procedures of incorporation and renewal of joint stock Company in Nepal.

Ans. Under the Company act, 2063, Joint Stock Company can be incorporated in the following steps:

Submission of application

After the completion of all the preliminary tasks, the promoters of the company file for an application in the company registrar’s office. The following details and information are to be attached along with the application:

Name and address of the proposed company.

Name and addresses of the promoters.

Details of capital of the company.

Type of industry or business

Other necessary particulars.

Payment of registration fee

In the second step the promoters should pay the registration fee in Nepal Rastra Bank and submit the voucher to the company registrar’s office. The registration fee is prescribed by the office of registrar through Nepal Gazette. The amount of registration fees depends upon the level of authorized capital of the business..

Obtaining certificate of incorporation: After submitting the registration application and registration fees the company registrar’s office checks them and if satisfied provides the certificate of incorporation to the promoters. A private company can start to function after it receives the certificate of incorporation however a public company should wait for the letter of commencement.

Obtaining certificate of commencement of business: A private company can start to function after it receives the certificate of incorporation however a public company should wait for the letter of commencement.

To obtain such certificate, an application with the proof of full payment of shares subscribed by the promoters should be submitted to the company registrar’s office. The registrar then goes through the document and if satisfied provides the certificate of commencement of business. After this, the public limited company can start its transaction and issue prospectus for the sale of shares and debentures.

Discuss the rights and duties of the board of directors.

Ans. The Board of Directors of a corporation is the group of individuals who are charged with running the Company. The duties of the board of directors and officers of the corporation are set by the corporate bylaws but are also set by law, specifically by the laws of the state where the business is incorporated.

The Board of Directors of a joint stock company has been one of the most significant areas in the commercial environment. The reason for such significance could be due to the fact that, the Board of Directors are the representation and administration body of a joint stock company among third parties or another reason for such significance could be on the basis that majority of the shareholders desire to manage the company and in doing so they would like to elect their own directors.

A board's activities are determined by the powers, duties, and responsibilities delegated to it or conferred on it by an authority outside itself. These matters are typically detailed in the organization's bylaws. The bylaws commonly also specify the number of members of the board, how they are to be chosen, and when they are to meet. However, some of the right and duties of the board of directors can be listed as follows:

To declare the rate of dividend each year.

To appoint the employees as per the requirement of the company.

To raise or issue debentures.

accounting to the stakeholders for the organization's performance

To make all the arrangements regarding the operation of the company and exercise its rights and duties according to the company act.

To not make any personal benefits except the facility provided to them by the meeting.

To not act in any way beyond the rights given to the board of directors.

To govern the organization by establishing broad policies and objectives.

To set the salaries and compensation of company management.

To ensure the availability of adequate financial resources.

Discuss the characteristics and advantages of a joint stock company.

Ans. A joint stock Company is a business organization where the stock of the company are bought and owned by the shareholders jointly. It is a company , which has some features of a corporation and some features of a partnership. The company sells fully transferable stock, but all shareholders have unlimited liability.

Characteristics of Joint Stock Company are:

Artificial person: A joint stock company is an artificial person and enjoys the facility of natural person in certain aspects.

Separate legal entity: Being an artificial person, a joint stock company has its own separate existence independent of its members. It means that a joint stock company can own property, enter into contracts and conduct any lawful business in its own name.

Perpetual existence: A joint stock company continues to exist as long as it fulfills the requirements of law. It is not affected by the death, lunacy, insolvency or retirement of any of its members.

Limited liability: The liability of shareholders of the company is limited up to their capital investment.

Freely transferable shares: the shares of the joint stock company are easily transferable from one person to another without prior permission from company.

Democratic management: Joint stock companies have democratic management and control. That is, even though the shareholders are owners of the company, all of them cannot participate in the management of the company.

Advantages of Joint Stock Company are:

Perpetual Existence: A company is an artificial legal person created by law which has its own independent legal status. Its existence is not affected by the death or insolvency of its members.

Transferability of shares: the shares of the joint stock company are easily transferable from one person to another without prior permission from company. Such transfer of shares does not affect the regular function of the company.

Large-scale production: Due to the availability of large financial resources and technical expertise it is possible for the companies to have large-scale production. It enables the company to produce more efficiently and at lower cost.

Contribution to society: A joint stock company offers employment to a large number of people. It facilitates promotion of various ancillary industries, trade and auxiliaries to trade. Sometimes it also donates money towards education, health and community services.

Divided risk: there are many shareholders in a joint stock company who buys shares of the company. So the risk of the company is divided among the shareholders.

What are the main documents of a joint stock company? Discuss the important clauses Of the Memorandum of Association. What are the main documents of a joint stock company? Discuss the important clauses Of the Memorandum of Association.

Ans. The main documents of a joint stock company are:

Memorandum of association: it shows the relation of the company with others and contains information such as capital, liability of the members and the objective of the company

Articles of Association: it is the written document of rules and regulations to achieve the objectives defined by the Memorandum of Association. The Memorandum of Association sets the objective of the organization. After that, rules and regulations are to be set to achieve the objectives. Thus, the Article of Association is the document which contains the rules and regulations. It consists of the regulations and by-laws for governing the internal affairs of the company. The contents in the Article of Association should not contradict with the contents of Company Act and Memorandum.

Name of the directors and their tenure in the office.

Privileges and restrictions to the preference shareholders.

Minimum number of shares to be subscribed by the directors.

The procedure for calling company meeting and notice to be given.

Rights and duties of the managing director.

Provisions relating to remuneration, allowances and facilities of directors.

All the matters mentioned in the Memorandum of Association.

Other necessary particulars.

Company can change any clause of articles of association passing special decision with approval through the company registrar’s office’s approval.

Prospectus: The registration of a company is to be followed by the capital raising procedure. To raise capital for the company, shares and debentures are issued. Thus, prospectus is the document created to issue public notice, circular or advertisement to invite public for the purchase of the securities of the company. It invites the public to buy the company’s shares and debentures. The prospectus also includes general information about the company, previous and projected income statement and balance sheet. The prospectus should be signed and dated by the promoters of the company. According to the company Act, 2063 a prospectus should contain the following matters:

The main clauses mentioned in the Memorandum and Articles of association.

Number of subscriptions available to the director plus their salaries and allowances.

Description of cash receipt as remuneration or reward by the promoters.

Provisions relating to bonus shares.

Provisions, if any, regarding reservation of shares for any shareholder, employee or other persons.

Names and addresses of the directors and number of shares subscribed.

Number of shares to be issued to the general public whether at par or premium.

Minimum number of shares to be subscribed and advance payment along with the application.

Brokerage on shares and debentures.

Net worth of the company.

Estimated expenditure and income of the company for at least three years.

Name and address of the auditor and audit report, if any.

Date of opening and closing of subscription list.

The balance sheet and P/L account of the company and time and place for inspecting them.

Details of underwriting of shares and commission of their earning.

Other necessary particulars.

The important clause of the memorandum of association can be discussed as follows:

Name clause: This is the first clause of the Memorandum of Association which contains the name of the company with the word ‘limited’ at the end. If the company is public,, words ‘public limited’ should be written in its name and if the company is private, words ‘private limited’ should be written in its name. Certain criterions are to be fulfilled to create a company name. They are: the name should not be identical with other company in the country, use of undesirable words is prohibited.

Situation or domicile clause: This clause of the Memorandum of Association contains the name and place of the company and shows the place where the registered office of the company is located. This is important as all the legal and important documents are kept in the registered office.

Objective clause: Objective or object clause is the most important clause of Memorandum of Association. It defines the scope of the company. A company is established with its own set of certain objectives. This clause allows them to do the activities allowed by the government. Thus this clause contains information about the objectives of the company.

Liabilities clause: The liabilities clause talks about the liability the shareholders. It states that the liability of every member is limited to the face value of their shares.

Capital clause: The capital clause mentions the total amount of authorized share capital. The different types of shares to be issued along with their face value are stated in this clause.

Association or subscription clause: The promoters of the company sign in the memorandum for the formation of the company in this clause. It mentions the names and addresses of subscribers. The subscribers express their consent in forming the company by agreeing to buy the necessary shares for becoming the subscribers of the company. In private company at least one subscriber should be present whereas public company requires 7.

Page 13

Define a public enterprise.

Ans. Public enterprises are business organization established owned, managed and controlled by the government. The government ownership can ranged from 51% to 100% of shares. They are established to provide essential goods and services to public at a reasonable price.

When government or public authority controls a business organization either wholly or partially it is said to be public enterprise. Government practices the control over the organization. This type of organization have service motive to promote social welfare.

According to A.H. Henson, “a Public enterprise means state ownership and operations of industrial, agricultural and commercial undertakings (enterprises).”

State the characteristics of a public enterprise?

Ans. The characteristics of the public enterprise are:

Business enterprise of government: Public enterprises are business enterprises established by government. They are engaged in manufacturing, marketing, public utilities and services. Government makes budget allocations to public enterprises. They are financed by state.

Government ownership, management and control:Public enterprises are owned by government. Their share capital is financed by Government. Government ranging from 51% to 100%.They get foreign assistance through government. The top management of public enterprises is appointed by government. This consists of board of directors and chief executive officer.

Service motive: Generally, public enterprises have service motive. They provide essential goods and services to public at reasonable price. They are guided by social welfare motive. They also generate profit and pay tax to the government.

Autonomy:Public enterprises enjoy autonomy or semi-autonomy in operations. They function as companies and corporations. The government does not interfere in their day to day functioning.

Public accountability: Public enterprises have public accountability. They are accountable to the parliament for their performance. The auditor general reports to the parliament about the performance of public enterprises. They are also accountable to general public through government.

Separate legal status: Public enterprises have separate legal status. They are established by a special act of Parliament, or Company Act or other acts. Public enterprises can enter into contract in their own name. They can sue and can be sued in courts of law.

Continued existence: Public enterprises have continued existence. They have stability. They are created by law and can be dissolved only by law. Changes in shareholders, management and employees do not affect the existence of public enterprises.

What are the objectives of Public enterprise?

Ans. The objectives of public enterprise are:

Economic development:Public enterprises were set up to accelerate the rate of economic growth in a planned manner. These enterprises have created a sound industrial base for rapid industrialization of the country. They are expected to provide infrastructure facilities for promoting balanced and diversified economic structure of development.

Self-reliance:Another aim of public enterprises is to promote self-reliance in strategic sectors of the national economy. For this purpose, public enterprises have been set up in transportation, communication, energy, petro-chemicals, and other key and basic industries.

Development of backward Areas:Several public enterprises were established in backward areas to reduce regional imbalances in development. Balanced development of different parts of the country is necessary for social as well as strategic reasons.

Employment generation:Unemployment has become a serious problem in India. Public enterprises seek to offer gainful employment to millions. In order to protect jobs, several sick units in the private sector have been nationalized.

Economic surplus:Public enterprises seek to generate and mobilize surplus for reinvestment. These enterprises earn money and mobilize public savings for industrial development.

Egalitarian society:An important objective of public enterprises is to prevent concentration of economic power and growth of private monopolies. Public sector helps the Government to enforce social control on trade and industry for ensuring equitable distribution of goods and services. Public enterprises protect and promote small scale industries.

Consumer welfare:Public enterprises seek to protect consumers from exploitation and profiteering by ensuring supply of essential commodities at cheaper prices. They aim at stabilizing prices.

What are the different types of public enterprises?

Ans. The different types of public enterprises are:

Departmental undertakings: They are the oldest among the public enterprises. A departmental undertaking is organized, managed and financed by the Government. It is controlled by a specific department of the government. Each such department is headed by a minister. All policy matters and other important decisions are taken by the controlling ministry. The Parliament lays down the general policy for such undertakings.

Statutory Corporation (or public corporation):They are established under special act in order to achieve specific economic objectives. Public corporation refers to a corporate body created by the Parliament or State Legislature by a special Act which defines its powers, functions and pattern of management. Statutory Corporation is Also Known As Public Corporation. Its capital is wholly provided by the government.

Government Company: Government Company refers to the company in which 51 percent or more of the paid up capital is held by the government. It is registered under the Companies Act and is fully governed by the provisions of the Act. Most business units owned and managed by government fall in this category. It is an enterprise established according to the company act 2063 under the ownership of government.

Page 14

Discuss the meaning and concept of state enterprise.

Ans. The term 'Public enterprise' refers to such industrial and commercial enterprises which are owned and controlled by the central and/or State Governments. Public enterprises are business organization established owned, managed and controlled by the government. The government ownership can ranged from 51% to 100% of shares. They are established to provide essential goods and services to public at reasonable prices.

A public sector enterprise may be defined as any commercial or industrial undertaking owned and managed by the government with a view to maximize social welfare and uphold the public interest.

According to A.H. Hanson, “Public enterprise means State ownership and operation of industrial, agricultural, financial and commercial undertaking.”

According to S.S. Khera, “by State undertakings is meant the industrial, commercial and economic activities carried on by the Central Government or by a State Government, and in each case, either solely or in association with private enterprise, so long it is managed by a self-contained management'.

According to M.E. Dimock, “public enterprise is publicly owned enterprise that has been chartered under federal state or local law for a particular business or financial purpose.”

Thus, public enterprise are the corporative body established under sole ownership of government or incorporation with private undertakings for industrial, commercial or other economic activities.

Explain thecharacteristics of public enterprise.

Ans. When government or public authority controls a business organization either wholly or partially it is said to be public enterprise. Government practices the control over the organization. This type of organization have service motive to promote social welfare. They are involved in production distribution and service sector but they have some special characteristics. Its characteristics can be explained as follows:

Business enterprise of government:Public enterprises are business enterprises established by government. They are engaged in manufacturing, marketing, public utilities and services. Government makes budget allocations to public enterprises. They are financed by state.

Government ownership, management and control:Public enterprises are owned by government. Their share capital is financed by government. Government ranging from 51% to 100%.They get foreign assistance through government. The top management of public enterprises is appointed by government. This consists of board of directors and chief executive officer.

Autonomy:Public enterprises enjoy autonomy or semi-autonomy in operations. They function as companies and corporations. The government does not interfere in their day to day functioning.

Public accountability: Public enterprises have public accountability. They are accountable to the parliament for their performance. The auditor general reports to the parliament about the performance of public enterprises. They are also accountable to general public through government.

Separate legal status:Public enterprises have separate legal status. They are established by a special act of Parliament, or Company Act or other acts. Public enterprises can enter into contract in their own name. They can sue and can be sued in courts of law.

Financed from Government Funds: The public enterprises get their capital from Government Funds and the government has to make provision for their capital in its budget.

Public Welfare: Public enterprises are not guided by profit motive. Their major focus is on providing the service or commodity at reasonable prices.

Explain different forms of public enterprises.

Ans. Different forms of public enterprises can be discussed as follows:

Its features are:

Line authority:The ultimate responsibility for management lies with the Minister concerned. The Minister in turn delegates his authority downward to the various levels, e.g., the departmental head, the chief executive of each undertaking, etc.

Government financing:The undertaking is financed through annual budget appropriations by the parliament or the State Legislature. The revenues of the undertaking are paid into the treasury.

Executive decision:A departmental undertaking is set up by an executive decision of the Government without any legislation.

Accounting and audit:The undertaking is subject to the normal budgeting, accounting and audit procedures applicable to other government departments.

Civil service code:The enterprise is managed by civil servants whose methods of recruitment and service conditions are the same as for other civil servants of the government.

Statutory Corporation (or public corporation): They are established under special act in order to achieve specific economic objectives. Public corporation refers to a corporate body created by the Parliament or State Legislature by a special Act, which defines its powers, functions and pattern of management. Statutory Corporation is Also Known As Public Corporation. Its capital is wholly provided by the government.

It features are:

Corporate body:It is a body corporate established through a special Act of Parliament or State Legislature. The Act defines its powers and privileges and its relationship with government departmentsand ministries.

Legal entity:It enjoys a separate legal entity with perpetual succession and common seal. It canacquire an own property in its own name. It can sue and be sued and can enter into contracts in its ownname.

Government ownership:The public corporation is wholly owned by the Central and/ or State Government.

Financial independence:It enjoys financial autonomy. Its initial capital and borrowings are provided by the government but it is supposed to be self-supporting. It can borrow money from the publicand is empowered to plough back its earnings.

Accounting system:The corporation s not subject to the budgetary, accounting and audit regulations applicable to government departments. It is generally exempt from the rigid rules applicable to the expenditure of public funds.

Management and personnel:A public corporation is managed by a Board of Directors appointed by the Government. However, its employees need not necessarily be civil servants. They can be employed on terms and conditions laid down by the corporation itself.

Service motive:The primary motive of the corporation is public service rather than private profits. It is, however, expected to operate in a business-like manner.

It features are:

Incorporation:It is registered under the Companies Act, 2063.

Separate legal entity: It has a separate legal entity. It can sue and be sued, and can acquire property in its own name.

Accountable to parliament: The annual reports of the government companies are required to be presented in parliament.

Ownership: The capital is wholly or partially provided by the government. In case of partially owned company the capital is provided both by the government and private investors. But in such a case the central or state government must own at least 51% shares of the company.

Management:It is managed by the Board of Directors. All the Directors or the majority of Directors are appointed by the government, depending upon the extent of private participation.

Own employees: a government has its own employees. They are not civil servants.

Explain departmental undertakings with its features. What are its drawbacks?

Ans. Departmental undertakings are the oldest among the public enterprises. A departmental undertaking is organized, managed and financed by the Government. It is controlled by a specific department of the government. Each such department is headed by a minister. All policy matters and other important decisions are taken by the controlling ministry. The Parliament lays down the general policy for such undertakings.

Its features are:

Line authority: The ultimate responsibility for management lies with the Minister concerned. The Minister in turn delegates his authority downward to the various levels, e.g., the departmental head, the chief executive of each undertaking, etc.

Government financing: The undertaking is financed through annual budget appropriations by the parliament or the State Legislature. The revenues of the undertaking are paid into the treasury.

Executive decision: A departmental undertaking is set up by an executive decision of the Government without any legislation.

Accounting and audit: The undertaking is subject to the normal budgeting, accounting and audit procedures applicable to other government departments.

Civil service code: The enterprise is managed by civil servants whose methods of recruitment and service conditions are the same as for other civil servants of the government.

Its Drawbacks are as follows:

Loss of autonomy:Excessive public accountability and Parliamentary control result in loss of freedom which is essential for efficient business operations. Frequent investigations by Parliamentary committees hamper the efficient functioning and growth of departmental undertakings.

Political influence:The undertaking is subject to political changes and its fate depends on thebalance of power between the ruling party and the opposition. There is lack of continuity inmanagement due to frequent changes in the Cabinet. Political considerations affect the policy mattersand long range planning is not possible.

Lack of flexibility:Complete centralization of control and political interference in day-to-dayoperations lead to lack of flexibility. There is bureaucracy and red-tape in day-to-day administration. Asa result decisions get delayed. Rigid adherence to time-consuming procedures and formalities make it difficult to run the undertaking in a businesslike manner.

Lack of professional management:The undertaking is managed by civil servants who do notoften possess managerial knowledge and skill. Frequent transfers and seniority based promotions tendto lower their motivation and morale. There is lack of initiative because the civil servants are afraid of breaking new ground due to fear of criticism by the Minister and the Parliament.

Inefficiency:Bureaucratic management, undue delays and insensitivity to consumer needs, andcumbersome regulations result in low efficiency of operations. There is a tendency not to take thelosses seriously as these are borne by the treasury

Explain public enterprise with the organizational features.

Ans. The term 'Public enterprise' refers to such industrial and commercial enterprises which are owned and controlled by the central and/or State Governments. Public enterprises are business organization established owned, managed and controlled by the government. The government ownership can rangedfrom 51% to 100% of shares. They are established to provide essential goods and services to public at reasonable prices.

Features:

Government ownership, management and control: Public enterprises are owned by government. Their share capital is financed by government. Government ranging from 51% to 100%. They get foreign assistance through government. The top management of public enterprises is appointed by government. This consists of board of directors and chief executive officer.

Service motive:Generally, public enterprises have service motive. They provide essential goods and services to public at reasonable price. They are guided by social welfare motive. They also generate profit and pay tax to the government.

Autonomy:Public enterprises enjoy autonomy or semi-autonomy in operations. They function as companies and corporations. The government does not interfere in their day to day functioning.

Public accountability:Public enterprises have public accountability. They are accountable to the parliament for their performance. The auditor general reports to the parliament about the performance of public enterprises. They are also accountable to general public through government.

Continued existence:Public enterprises have continued existence. They have stability. They are created by law and can be dissolved only by law. Changes in shareholders, management and employees do not affect the existence of public enterprises.

Financed from Government Funds: The public enterprises get their capital from Government Funds and the government has to make provision for their capital in its budget.

Public Welfare: Public enterprises are not guided by profit motive. Their major focus is on providing the service or commodity at reasonable prices.

Explain government companies with its distinct features.

Ans. Government Company: Government Company refers to the company in which 51 percent or more of the paid up capital is held by the government. It is registered under the Companies Act and is fully governed by the provisions of the Act. Most business units owned and managed by government fall in this category. It is an enterprise established according to the company act 2063 under the ownership of government.

The company act, 2063 has defines government company as those institutions or organizations registered under this act and whole shares ownership or not less than fifty one percent shares are held by Nepal Government owned corporation.

It features are:

Incorporation: It is registered under the Companies Act, 2063.

Separate legal entity: It has a separate legal entity. It can sue and be sued, and can acquire property in its own name.

Accountable to parliament: The annual reports of the government companies are required to be presented in parliament.

Ownership:The capital is wholly or partially provided by the government. In case of partially owned company the capital is provided both by the government and private investors. But in such a case the central or state government must own at least 51% shares of the company.

Management:It is managed by the Board of Directors. All the Directors or the majority of Directors are appointed by the government, depending upon the extent of private participation.

Own employees: a government has its own employees. They are not civil servants.

Define a public corporation. What are its special features? How does it compare with Joint Stock Company?

Ans. public corporations are established under special act in order to achieve a specific economic objective. Public corporation refers to a corporate body created by the Parliament or State Legislature by a special Act which defines its powers, functions and pattern of management. Statutory Corporation is also known as Public Corporation. Its capital is wholly provided by the government.

It features are:

Corporate body:It is a body corporate established through a special Act of Parliament or State Legislature. The Act defines its powers and privileges and its relationship with government departments and ministries.

Legal entity:It enjoys a separate legal entity with perpetual succession and common seal. It can acquire an own property in its own name. It can sue and be sued and can enter into contracts in its own name.

Government ownership: The public corporation is wholly owned by the Central and/ or State Government.

Service motive: The primary motive of the corporation is public service rather than private profits. It is, however, expected to operate in a business-like manner.

Define Government Company and describe its merits and demerits.

Merits of Government Companies

The merits of government company form of organizing a public enterprise are as follows:

Simple Procedure of Establishment: A government company, as compared to other public enterprises, can be easily formed, as there is no need to get a bill passed by the parliament or state legislature. It can be formed simply by following the procedure laid down by the Companies Act.

Efficient Working on Business Lines: The government company can be run on business principles. It is fully independent in financial and administrative matters. Its Board of Directors usually consists of some professionals and independent persons of repute.

Efficient Management: As the Annual Report of the government company is placed before both the house of Parliament for discussion, its management is cautious in carrying out its activities and ensures efficiency in managing the business.

Healthy Competition: These companies usually offer a healthy competition to private sector and thus, ensure availability of goods and services at reasonable prices without compromising on the quality.

Limitation of Government Companies

The government companies suffer from the following limitations:

Lack of Initiative: The management of government companies always has the fear of public accountability. As a result, they lack initiative in taking right decisions at the right time. Moreover, some directors may not take real interest in business for fear of public criticism.

Lack of Business Experience: In practice, the management of these companies is generally put into the hands of administrative service officers who often lack experience in managing the business organization on professional lines. So, in most cases, they fail to achieve the required efficiency levels.

Change in Policies and Management: The policies and management of these companies generally keep on changing with the change of government. Frequent change of rules, policies and procedures leads to an unhealthy situation of the business enterprises.

Page 15

What do you understand by cooperative organization?

Ans. Co-operatives are autonomous associations formed and democratically directed by people who come together to meet common economic, social, and cultural needs. A cooperative is an autonomous association of persons who voluntarily cooperate for their mutual social, economic, and culture benefit. Cooperatives include non-profit organizations and business that are owned and managed by the people who use its services or by the people who work there. Co-ops are governed by those who use their services: their members.

Based on the principles of empowerment, education, and community, co-ops operate laterally promoting participation both within their own organization, and through a focus on community interaction, and support.

According to J.J Worly, “ a cooperative society must rest on free universal association democratically governed and conditioned by equality and personal liberty.”

According to Nepal cooperative act, 2048 “ society or unions means primary cooperative society or union registered under section 5.”

What are the features of cooperative organization?

Ans. The features of cooperative organization are:

Open membership: The membership of a Co-operative Society is open to all those who have a common interest. A minimum of ten members are required to form a cooperative society. The Co–operative society Act does not specify the maximum number of members for any co-operative society. However, after the formation of the society, the member may specify the maximum number of members.

Voluntary Association: Members join the co-operative society voluntarily, that is, by choice. A member can join the society as and when he likes, continue for as long as he likes, and leave the society at will.

State control: To protect the interest of members, co-operative societies are placed under state control through registration. While getting registered, a society has to submit details about the members and the business it is to undertake. It has to maintain books of accounts, which are to be audited by government auditors.

Sources of Finance: In a co-operative society capital is contributed by all the members. However, it can easily raise loans and secure grants from government after its registration.

Democratic Management: Co-operative societies are managed on democratic lines. The society is managed by a group known as “Board of Directors”. The members of the board of directors are the elected representatives of the society. Each member has a single vote, irrespective of the number of shares held. For example, in a village credit society the small farmer having one share has equal voting right as that of a landlord having 20 shares.

Service motive: Co-operatives are not formed to maximise profit like other forms of business organisation. The main purpose of a Co-operative Society is to provide service to its members. For example, in a Consumer Co-operative Store, goods are sold to its members at a reasonable price by retaining a small margin of profit. It also provides better quality goods to its members and the general public.

Separate Legal Entity: A Co-operative Society is registered under the Co-operative Societies Act. After registration a society becomes a separate legal entity, with limited liability of its members. Death, insolvency or lunacy of a member does not affect the existence of a society. It can enter into agreements with others and can purchase or sell properties in its own name.

Distribution of surplus:Unlike profit-oriented enterprises, the surplus (i.e., profit after limited interest has been paid on capital) of a co-operative society is not distributed to the members in the ratio of their capital contribution or in an agreed ratio. Under the provisions of the law, at least 25 percent of the profit must be transferred to the general reserve. Likewise, a certain percentage (not exceeding 10) may also be utilized for the general welfare of the local community.

What are the functions of national cooperative development boards?

Ans. National Cooperative Development Board (NCDB) was formed in August 1991(2049) under Nepal Development Act, 2049 with decision of Government of Nepal. The Board was initially entrusted the responsibility of revising the cooperative legislation and designing a strategy for revitalizing the cooperative movement so as to make it reliant and people managed.

Its functions are:

To assist the Government in formulating plans and policies concerning cooperative development;

To facilitate the implementation of cooperative policies;

To create and maintain a cooperative development fund with a view to providing cooperative with loans or grants for development purpose;

To participate in the share capital of cooperative societies, unions or banks;

To stand surety for cooperatives;

To extend technical assistance to cooperatives;

To bring coordination between cooperatives and other related government as well as Nongovernmental agencies/organizations, and thereby, encourage cooperatives to expand their business services;

To facilitate joint investment of the Government, cooperative and other national as well as international organizations for the industrial development in the cooperative sector;

To conduct the required studies and research work for cooperative development; and

To carry out all other functions as may be deemed necessary promoting the cooperative movement.

How is cooperative different from company?

Ans the differences between cooperative and company are:

Base	Cooperative	Company
Objective	The primary objective of a cooperative society is to provide service.	The primary objective of a company is to earn profit.
Number of members	A cooperative requires at least 10 members, and maximum number of members is 100 in cooperative.	The minimum number of persons is 7 in a public company and 2 in a private company. The maximum number of members is 50 in a private company
Member's liability:	The members of a cooperative society can opt for unlimited liability. But in practice their liability is generally limited.	The liability of members of a company is generally limited to the face value of shares held or the amount of guarantee given by them though the Companies Act permits unlimited liability to companies.
membership	The membership of a cooperative is open at all times and new members have to pay the same amount per share as old ones have paid.	A company closes the list of members as soon as its capital is fully subscribed. People who want to become members later on have to buy shares at the stock exchange.
Management and control	The management of a cooperative is democratic as each member has one vote and there is no system of proxy.	In a company, the number of votes depends upon the number of shares and proxies held by a member.
exemptions and privileges	A cooperative society enjoys several exemptions and privileges regarding income tax, stamp duty, etc.	No such exemptions, privileges and assistance are available to a public limited company. A private limited company, however, enjoys a number of exemptions and privileges under the Companies Act.

Page 16

Discuss the meaning and importance of cooperative organization.

According to J.J Worly, “a cooperative society must rest on free universal association democratically governed and conditioned by equality and personal liberty.”

According to Nepal cooperative act, 2048 “society or unions means primary cooperative society or union registered under section 5.”

According to Prof. Henery Calvert, “cooperative is a form of organization where in persons voluntarily associates together as human beings on the basis of for the promotion of economic interest of themselves.”

Their importance are:

Safeguard people from economic exploitation: Co-operative organizations eliminate: monopoly, concentration of power and wealth and high interests loan. It saves the people from getting exploited. It safeguards the normal citizens from the evil of capitalists and all anti-social activities.

Marketing and warehousing: Co-operative organizations provide warehouses for storing the goods of farmers. The farmers can sell when demand of the products increase. Likewise, it directly buys from the farmers and sells them to the customers. The unnecessary cost of middlemen is reduced as a result.

Developing cottage industry: Co-operative organizations help in developing cottage industries in rural areas. Co-operative organizations provide financial and technical support to the poor farmers and entrepreneurs. This aids in creation of employment opportunities and reduce the poverty level of the country.

Mobilize savings for productive activity: Co-operative organizations mobilize the savings of people into productive activity. This encourages the people to save and make investments in production of commodities. As a result quality products are made available to the people at lower prices.

Employment opportunities: Co-operative organizations directly and indirectly contribute to the generation of employment opportunities in the country. They directly create various kinds of job for the deserving people. Likewise, the technical and financial help provided by them helps to make people self-employed.

Develop moral character: The main objective of a Co-operative organization is to render service rather than earn profit. They do not discriminate the people on the basis of their sex, caste or religion. This develops feeling of mutual help, self-help, hard work and aids in the development of moral character of the society.

Promotes democracy: A Co-operative organization is established on democratic rules and principles. The members who run the Co-operative organization are elected by the majority of the members. Thus, such kinds of activities promote democracy and responsibility among the members.

Improving living standard: Co-operative organizations provide employment and create opportunities for the low-income group of the society. This increases their level of income. Greater income provides greater access to basic human necessities. Thus, it increases the living standard of the people.

Explain the features of cooperative organization. State its economic importance.

Sources of Finance: In a co-operative society capital is contributed by all the members. However, it can easily raise loans and secure grants from government after its registration.

Its importances are:

Developing cottage industry: Co-operative organizations help in developing cottage industries in rural areas. Co-operative organizations provide financial and technical support to the poor farmers and entrepreneurs. This aids in creation of employment opportunities and reduce the poverty level of the country.

Employment opportunities: Co-operative organizations directly and indirectly contribute to the generation of employment opportunities in the country. They directly create various kinds of job for the deserving people. Likewise, the technical and financial help provided by them helps to make people self-employed.

Improving living standard: Co-operative organizations provide employment and create opportunities for the low-income group of the society. This increases their level of income. Greater income provides greater access to basic human necessities. Thus, it increases the living standard of the people.

What are different types of cooperative organization?

The different types of cooperative organization are:

Consumers’ Co-operative Society: These societies are formed to protect the interest of general consumers by making consumer goods available at a reasonable price. They buy goods directly from the producers or manufacturers and thereby eliminate the middlemen in the process of distribution. Kendriya Bhandar, Apna Bazar and Sahkari Bhandar are examples of consumers’ co-operative society.

Producers’ Co-operative Society: These societies are formed to protect the interest of small producers by making available items of their need for production like raw materials, tools and equipments, machinery, etc. Handloom societies like APPCO, Bayanika, Haryana Handloom, etc., are examples of producers’ co-operative society.

Co-operative Marketing Society: These societies are formed by small producers and manufacturers who find it difficult to sell their products individually. The society collects the products from the individual members and takes the responsibility of selling those products in the market. Gujarat Co-operative Milk Marketing Federation that sells AMUL milk products is an example of marketing co-operative society.

Co-operative Credit Society: These societies are formed to provide financial support to the members. The society accepts deposits from members and grants them loans at reasonable rates of interest in times of need. Village Service Co-operative Society and Urban Cooperative Banks are examples of co-operative credit society.

Co-operative Farming Society: These societies are formed by small farmers to work jointly and thereby enjoy the benefits of large-scale farming. Lift-irrigation cooperative societies and pani-panchayats are some of the examples of co-operative farming society.

Housing Co-operative Society: These societies are formed to provide residential houses to members. They purchase land, develop it and construct houses or flats and allot the same to members. Some societies also provide loans at low rate of interest to members to construct their own houses. The Employees’ Housing Societies and Metropolitan Housing Co operative Society are examples of housing co-operative society.

Explain the registration procedure of cooperative in modern times.

A cooperative organization can carry out its functions only after its registration under the cooperative act 2048. For registration of cooperatives following procedures should be followed.

Preliminary meeting:According to the cooperative act 2048 there should be at least 25 members to form a cooperative society. Preliminary meeting must be held before applying for the registration. The meeting is held in the presence of 25 members under 1 chairman among them. The following things should be discussed in the meeting:

Commencement of the business

The name and address of the society

The objectives of the society

The value of each share

Membership fee

Filing an application for registration: After preparing and passing proposed by laws and working schemes in the preliminary general meeting. In application should be submitted to the office of registrar, department of cooperatives, and government of Nepal

Following things are mentioned in the application form

Proposed name of society

Address of society

Its Objectives

Working areas

Liabilities

Total share capital

Total number of shares to be paid

Two copies of law of proposed society

Original copy of working scheme

Copies of citizen certificate

Application must be signed by chairman

Receiving the certificate of registration:After filing application for registration, certificate of registration is to be received. After applying application along with document, they are submitted at the registration office. Then the registrar checks all the documents. If the documents are satisfactory then registrar will issue certificate of registration. After receiving certificate of registration, the society can operate.

Legal provisions for dissolution of co-operative society

According to the cooperative act 2048 cooperative society can be dissolved under following circumstances

Two third majority of total number of society can take decisions of dissolution.

Registrar can dissolve it, if application with reasonable clause is received.

Registrar can dissolve it, if the society is found inactive and not operating since two years.

The registrar can dissolve it, if it is found operating against the law and objectives of it.

Discuss the role played by consumer co-operatives in the modern society.

Ans. Co-operative organizations that are established to eliminate the unnecessary cost and time incurred by middlemen are known as a consumer co-operative. It is organizations of consumers aimed at purchasing goods at wholesale prices and ensures a steady supply to the members at a cheaper price. It creates a direct link with the wholesalers or producers to buy goods in bulk and sell them at a nominal price. The consumer Co-operative organizations play an important role in the modern society where exploitation and extortion is uncommon. It is that society that procures assortment of household goods to its members. They ensure a cheapest possible price and ensure availability of these goods to its members at anytime it is needed. Their roles can be explained as follows:

Selling of pure and unadulterated goods: The Co-operative organizations buy quality goods directly from the producers. The products are pure and unadulterated. Since, the middlemen are removed it ensures that the product bought are of the topmost quality. Co-operative organizations are welfare oriented thus gaining extra profit by adulterating the products is out of context.

Ensuring availability of goods: Co-operative organizations not only sell pure and unadulterated goods but also ensure their steady supply. They are actively involved in ascertain the demand of the members and prevent shortages. Moreover, they also provide warehousing facilities which helps store products for future use.

Selling at a very reasonable price: Co-operative society ensures a cheapest possible price and availability of these goods to its members at anytime it is needed. The organization buys at bulk directly from the producer with no middlemen charge. And since it is not profit-oriented, cheaper price is considered over extra monetary gains.

Educating members: Co-operative organizations educate their members regarding their consumer rights and their responsibilities too. They teach the members about the basic products, their features and so on. The modern world is always trying to extort the consumers. Thus the Co-operative organization educates the people about it.

Thus, from the above explanation we can say that consumer co-operatives play a significant role in this modern time.

What are housing co-operatives? Explain their importance in the present context of Nepal.

Ans. Co-operative organization established to secure the ownership of a house or obtaining accommodation at fair and reasonable rents for its members is known as housing co-operative. These types of co-operatives are mostly formed in urban areas. The members not only get financial assistance but also get the benefits of economies in purchase of building and so on. The membership of such an organization is open to all interested in securing housing accommodation and those who are ready to deposit money in the society for interest.

The Nepalese society currently is passing through rapid urbanization. However with urbanization the price of land and rent has skyrocketed. The normal people who have migrated to the urban areas to earn their livelihood are facing troubles in housing and accommodation. Normally, the rent of housing is very high plus the accommodation facilities are very poor too. Hence, the need of housing co-operatives is at its prime. The importance of housing co-operatives as in the present context of Nepal is explained as below:

Housing benefits:

Today, an average Nepalese has to pay a large sum of income in housing. The housing co-operatives develop modest housing that makes basic shelter affordable to these Nepalese. The need of livable and environmentally sound housing projects is a real necessity in Nepal as of today. Thus, housing co-operatives play an important role in providing housing benefits to the Nepalese people.

Empowering low and moderate income Nepalese

The housing co-operatives make special efforts to empower their members through new trainings and helping members take new tasks. A sort of adult education is provided as many lower income households are led by single individuals. And it is their decision that affects the family. Thus, the housing co-operatives are actively involved in providing empowerment to the low and moderate income Nepalese.

Serving Nepalese with special needs:

The housing co-operatives focus their issues such as housing accessibility for the disabled, or the challenges faced by new urban migrants. Efforts have been made to address the shelter needs of victims of child and women violence. Housing co-operatives along with government support are actively involved in addressing the issues of Nepalese people with special cases.

Enacting policies and practices:

Housing co-operatives in Nepal play an important role in enacting policies and practices that encourage full participation among lower income Nepalese, people with disabilities, women and minority groups.

Identify and solve problems:

Housing co-operatives in Nepal are engaged in solving other social policy problems, using safe, affordable housing as a springboard for other activities. It encourages acceptance of the co-operative form of housing tenure within the Nepalese society.

Thus from the above explanations we can easily suggest that Housing co-operatives play an important role in the present day Nepal.

Page 17

Define Multinational Company.

Ans. A multinational company is an organization or enterprise doing business in more than one country. 'In other words it is an Organization or enterprise carrying on business in not only the country where it is registered but also in several other countries. It is a company which has its day to day business running around the globe in several countries rather than the host country only. Thus, it is the company which is operating its business in two or more than two countries.

Explain the features of the multinational companies.

Ans. a multinational company carries on business operations in two or more countries. It has its own characteristics which are as follows:

Large Size:A multinational company is generally big in size. Some of the multinational companies own and control assets worth billions of dollars. Their annual sales turnover is more than the gross national product of many small countries.

Worldwide operations:A multinational corporation carries on business in more than one country. Multinational Corporations such as Coco cola has branches in as many as seventy countries around the world.

International management:The management of multinational companies are international in character. It operates on the basis of best possible alternative available anywhere in the world. Its local subsidiaries are managed generally by the nationals of the host country.

Mobility of resources: The operation of multinational company involves the mobility of capital, technology, entrepreneurship and other factors of production across the territories.

Integrated activities: A multinational company is usually a complete Organization comprising manufacturing, marketing, research and development and other facilities.

Several forms: A multinational company may operate in host countries in several ways i.e., branches, subsidiaries, franchise, joint ventures. Turn key projects.

Explain the roles/importance of multinational companies in the host countries

Ans. The roles/ importance of multinational companies can be explained as follows:

Providing employment: multinational companies will usually result in employees’ benefits for the host country as most of the employees are locally recruited.

Source of tax revenues: profits of multinational companies will be subject to local taxes in most cases, which will provide a valuable source of revenue for the domestic government.

Consumer benefits: The consumers benefits by way of lower prices and better quality products as compared to than that of outer countries.

National reputation: The presence of the multinational companies helps to improve the reputation of the host country among other nations.

Explain the drawbacks of the multinational company.

Ans. The drawbacks of multinational companies can be explained as follows:

Pushes Local Firms Out Of Business:In the developing economies, these giant multinationals use the economies of scale for pushing the local firms out of their businesses.

Environment Threat: For the sake of profit, these global companies commonly contribute to pollution as well as make use of the non-renewable resources that can be a threat to the environment.

Complexity:Running a business with locations in more than one country adds an additional layer of complexity to operating and managing a company.

Political Risks: As the operations of the multinational companies are wide spread across national boundaries of several countries they may result in a threat to the economic and political sovereignty of host countries.

Loss of Natural Resources:Multinational companies use natural resources of the home country in order to make huge profit which results in the depletion of the resources thus causing a loss of natural resources for the economy.

Page 18

What is multinational company? Explain its features.

Ans. A “multinational company” is also referred to as an international, transactional or global corporation. As the word very well suggests, Multinational Company is a company that owns or controls production in more than one nation.

A multinational company is an organization or enterprise doing business in more than one country. 'In other words it is an Organization or enterprise carrying on business in not only the country where it is registered but also in several other countries. It is a Company which have its day to day business running around the globe in several countries rather than the host country only. Thus, it is the company which is operating its business in two or more than two countries.

However, Multinational Companies has its own features that can be further discussed below:

Large Size: A multinational company is generally big in size. Some of the multinational companies own and control assets worth billions of dollars. Their annual sales turnover is more than the gross national product of many small countries.

Worldwide Operation: The multinational companies extend their operation to two or more countries. They establish parent office in one country and extend branches, subsidiary and affiliation to other countries.

High Efficiency: Advanced technologies are used are for multinational companies. So, manpower can give well training, which increase efficiency of manpower. Due to this cause, the multinational companies can provide large volume of quality products at cheaper price.

International management: The management of multinational companies are international in character. It operates on the basis of best possible alternative available anywhere in the world. Its local subsidiaries are managed generally by the nationals of the host country.

Mobility of resources: The operation of multinational company involves the mobility of capital, technology, entrepreneurship and other factors of production across the territories.

Integrated activities: A multinational company is usually a complete Organization comprising manufacturing, marketing, research and development and other facilities.

Ownership and control: The ownership of such company is shared by both parent company and branch companies as per their capital investment. However, parent Company manages and controls the operation of its branches and subsidiary through trade mark, technology, and patent right.

Explain the importance and drawbacks of multinational company.

Ans. The importance of Multinational Company are:

Transfer of Capital and Technology: The multinational companies transfer investment,advance technology to developing countries through establishing branchesand subsidiaries. Therefore developing countries like Nepal get benefited of receiving advanced technology and capital
investment through such companies.

Mass Production:With help of advanced technology, the can produce quality goods and products at cheaper price.Due to Job innovation and specialization help to produce more consumption increase as production in more units reduce cost.

Increase in Employment Opportunity:A multinational company requires a large number of skilled as well as unskilled employees to operate its activities.Thus it provides employment opportunity to the people of host country as a result economic standard of society is improved.

Increase in Government Revenue:A multinational company is a large scale business.It pays a large amount of duties,income tax, vat,etc to government. Therefore Government revenue is increased due to operation of such companies.

Research and Development:In complete world, it is need of Research and Development. To meet international standard of its products and services,a multinational company conducts several research and development activities.Constantly such programs are beneficial to society.It helps to develop better equipments, quality products and advanced technology in production.

Good International Relation:A multinational company recognizes the country in the international market. It creates harmonious relation between parent company
and subsidiary countries. It recognizes exporting country to all over the world.

The drawback of multinational company are:

Pushes Local Firms Out Of Business: In the developing economies, these giant multinationals use the economies of scale for pushing the local firms out of their businesses.

Environment Threat: For the sake of profit, these global companies commonly contribute to pollution as well as make use of the non-renewable resources that can be a threat to the environment.

Complexity: Running a business with locations in more than one country adds an additional layer of complexity to operating and managing a company.

Loss of Natural Resources: Multinational companies use natural resources of the home country in order to make huge profit, which results in the depletion of the resources thus causing a loss of natural resources for the economy.

Why do developing countries allow multinational companies to operate in their countries? Explain

Ans. A multinational company is an organization or enterprise doing business in more than one country. 'In other words it is an Organization or enterprise carrying on business in not only the country where it is registered but also in several other countries. It is a Company which have its day to day business running around the globe in several countries rather than the host country only. Thus, it is the company which is operating its business in two or more than two countries.

However, there are many reasons why developing countries allows multinational companies to operate in their countries which can be explained as follow:

Transfer of Capital and Technology: The multinational companies transfer investment , advance technology to developing countries through establishing branches and subsidiaries. Therefore developing countries like Nepal get benefited of receiving advanced technology and capital
investment through such companies.

Mass Production: With help of advanced technology, the can produce quality goods and products at cheaper price. Due to Job innovation and specialization help to produce more consumption increase as production in more units reduce cost.

Increase in Employment Opportunity: A multinational company requires a large number of skilled as well as unskilled employees to operate its activities. Thus it provides employment opportunity to the people of host country as a result economic standard of society is improved.

Increase in Government Revenue: A multinational company is a large scale business. It pays a large amount of duties, income tax, vat, etc to government. Therefore Government revenue is increased due to operation of such companies.

Research and Development: In complete world, it is need of Research and Development. To meet international standard of its products and services, a multinational company conducts several research and development activities. Constantly such programs are beneficial to society. It helps to develop better equipment, quality products and advanced technology in production.

Good International Relation: A multinational company recognizes the country in the international market. It creates harmonious relation between parent company
and subsidiary countries. It recognizes exporting country to all over the world.

Page 19

Explain the formation of Nepal Chamber of Commerce.

Each and every individuals and organization engaged in trade and commerce and other related work are eligible to be a member of NCC. It gives the following types of membership:

a. Life member

b. Ordinary member

c. Affiliated member

d. Honorary member

Executive Committee:The executive committee of NCC comprises of 36 members out of whom 29 are elected by the general assembly, 4 are nominated from the associated member, 1 from general members and rest 1 is nominated by the president of NCC.

General Meeting:The general meeting of NCC is held on an annual basis where resolutions are discussed and passed. Likewise, in the general meeting annual progress report and audit report are presented for necessary comments and approval.

Committee associated with NCC:The following committees are convened by the president of NCC on the basis of the requirement of the business community:

Advisory committee

Consultative committee

Nepal chamber foundation

Publication committee

Mention the major functions of Nepal Chamber of Commerce.

The primary objective of NCC is to ensure development of trade and commerce in the country. To attain these objectives NCC performs the following functions:

Maintain relationship with business community: An important function of NCC is to maintain good and smooth relationship among the business communities of Nepal. It should co-operate with all the business communities and should function as an arbitrator to settle any disputes between the communities.

Maintain links with international business communities: NCC should be able to develop and maintain a link between the national and international business communities. The NCC maintains link with chamber of commerce and business communities of various countries.

Organize trade and industrial fairs: NCC organizes and participates in trade and industrial fairs at national and international level. It facilitates Nepalese business community to participate in such fairs and assists in promoting local business activities.

Establish academic institutions: It establishes and encourages establishing academic institutions related to trade and commerce. Plus, it also conducts trainings, seminars and workshops to provide technical assistance in national and international level.

Issue certificate of origin: Another important function of NCC is to issue certificate of origin to the Nepalese products. With the aid of this certificate Nepalese products get some exemption in tax and custom duty in foreign countries.

Conduct social welfare activities: NCC is actively indulged in charitable activities. It provides financial and technical support to the institutions involved in serving the society. For instance, it has provided free ambulance and corpse service in Kathmandu valley.

Explain the formation of Federation of Nepal Chamber of Commerce and Industries.

Membership

The FNCCI membership comprises of:

92 district and municipality chambers in 75 districts of Nepal

68 commodity and sectorial associations

321 leading public and private sector undertakings

Councils

There are 3 councils namely: district council, commodity council and employer’s council.

Membership Committee

The membership committee filters the application for memberships and submits recommendation to the Executive for decision to grant the membership of FNCCI.

General Assembly and Executive Committee

The general assembly is the highest policy making body of FNCCI. The activities and functions of FNCCI are planned and managed by the Executive committee consisting 74 members including President and 5 nominated members who have tenure of 3 years.

The executive committee of FNCII is composed of:

1 president

1 immediate vice president

1 senior vice president

3 vice presidents

Secretariat

The FNCCI has a professional secretariat with business library, training unit and human resources development centre for effective day-to-day operation of FNCCI.

Explain the major functions of Federation of Nepal Chamber of Commerce and Industries.

Represents business communities: It represents the Nepalese business community at both national and international level. It is the formal institution that fulfills the interest of business communities to keep the voice of the business community in various essential places.

Provides expertise service: FNCCI provides expertise service to the business community. It provides information regarding areas, scopes, facilities and difficulties in business sector of Nepal.

Promotes entrepreneurship: Entrepreneurship defines the creation and operation of a business. FNCCI is actively involved in providing technical, financial and logistic support to the general people for the development of entrepreneurship.

Promotes joint venture: FNCCI aims to promote joint venture of Nepalese entrepreneurs or foreign investors to develop Nepalese trade and commerce. It facilitates introduction of new technology and ideas for investments.

Promotes export: It recommends export of local products and aids to prepare formal documents essential to exporting goods.

Promoting better industrial relations: FNCCI is always resolving any disputes and conflicts between the business communities of Nepal. This helps to promote and maintain a healthy industrial relation.

Helps strengthen economy of the nation: FNCCI aids in promoting trade and export in the country. More export means more foreign currency for the country. This strengthens the economy of the country. Likewise, it launches activities for the promotion of trade and commerce, which helps to industrialize and commercialize the nation.

Explain the functions of Trade and Export Promotion Centre.

Finds the problem of foreign trade: TEPC is actively involved in finding out the problems being faced Nepalese businessmen in foreign trade. In accordance to their findings, they provide suggestions to the government.

Strengthen the national economy: TEPC launches programs by establishing co-operation among various agencies for increasing the production of exportable goods. This contributes in strengthening the economy of the country.

Counseling to the government: The government is always in need of information to formulate foreign trade plans and policies. TEPC provides appropriate information in formulating policies and preparing suitable environment in foreign trade.

Support the exporters: TEPC supports the exporters by creating new markets for their products. It conducts trainings, workshops and seminars to simplify export related procedures like quality control, transport, insurance and so on.

Attract investment: The programs formulated and implemented by TEPC aims to attract foreign and domestic investments.

Publishes trade related trade journals: TEPC publishes trade related journals, which provides information of Nepalese business scenario to the businessmen of Nepal and outside the country.

Co-operate to diversify trade: TEPC co-operates in opening institutions to promote export and diversify trade. It provides technical support to those organizations, which want to diversify their product and service with the purpose of exporting them to foreign countries.

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What do you mean by Nepal Chamber of Commerce? Explain its formation.

Nepal Chamber of Commerce established in 1952 AD is the common organization of trading business persons and organizations located in Nepal. NCC is the first recognized organization of businessmen. It has been playing a significant role in formulation of industrial policy, commercial policy and fiscal policies for the promotion of trade and commerce in Nepal. NCC has relation with international organizations such as WTO, Bangkok and so on. Since its establishment NCC has been actively involved in conducting trading and development programs in the country for the welfare of trade and commerce.

The formation of NCC is as follows:

Membership

a. Life member

b. Ordinary member

c. Affiliated member

d. Honorary member

Committee associated with NCC:The following committees are convened by the president of NCC on the basis of the requirement of the business community:

Advisory committee

Consultative committee

Nepal chamber foundation

Publication committee

Introduce Nepal Chamber of Commerce. Explain its major functions.

The primary objective of NCC is to ensure development of trade and commerce in the country. To attain these objectives NCC performs the following functions:

What do you mean by Federation of Nepal Chamber of Commerce and Industries? Explain its formation.

FNCCI or Federation of Nepal Chamber of Commerce and Industries established in 1965 AD is the umbrella organization of Nepalese private sector. It was created with the objective of promoting business and industries whilst protecting rights and interests of business and industrial communities. It organizes training, workshops in the national and international level. It also provides informative consultative, advisory and similar other services to the business communities and government too. From the day of its creation FNCCI has been playing a pivotal role in promotion of trade and commerce in the country.

The formation of FNCCI is as follows:

Membership

The FNCCI membership comprises of:

92 district and municipality chambers in 75 districts of Nepal

68 commodity and sectorial associations

321 leading public and private sector undertakings

Councils

There are 3 councils namely: district council, commodity council and employer’s council.

Membership Committee

The membership committee filters the application for memberships and submits recommendation to the Executive for decision to grant the membership of FNCCI.

General Assembly and Executive Committee

The executive committee of FNCII is composed of:

1 president

1 immediate vice president

1 senior vice president

3 vice presidents

Secretariat

The FNCCI has a professional secretariat with business library, training unit and human resources development centre for effective day-to-day operation of FNCCI.

Introduce federation of Nepal Chamber of Commerce and Industries. Explain its major functions.

The major functions of Federation of Nepal Chamber of Commerce and Industries are explained below:

Provides expertise service: FNCCI provides expertise service to the business community. It provides information regarding areas, scopes, facilities and difficulties in business sector of Nepal.

Promotes export: It recommends export of local products and aids to prepare formal documents essential to exporting goods.

Helps strengthen economy of the nation: FNCCI aids in promoting trade and export in the country. More export means more foreign currency for the country. This strengthens the economy of the country. Likewise, it launches activities for the promotion of trade and commerce which helps to industrialize and commercialize the nation.

What do you mean by Trade and Export Promotion Centre? Explain its major functions.

In the year 2006, the government merged three organizations: Trade Promotion Centre, Export Promotion Board and Wool Development Board to form TEPC (Trade and Export Promotion Centre). TEPC was established with the main objective of promoting foreign trade in general and export trade of the country. Since Nepal’s trade deficit was always on the rise, export development and promotion was considered as the ultimate tool to reduce the trade deficit. It is working between government of Nepal and exporters to maintain relation and exchange information with trade related international agencies.

It provides support to the private business sector to promote export oriented production and distribution of goods and services. In general the objective of TEPC is to promote foreign trade and export. For the fulfillment of this objective the TEPC performs the following functions:

Attract investment: The programs formulated and implemented by TEPC aims to attract foreign and domestic investments.

Publishes trade related trade journals: TEPC publishes trade related journals, which provides information of Nepalese business scenario to the businessmen of Nepal and outside the country.